Web.com Reports First Quarter 2009 Financial Results

May 4, 2009

JACKSONVILLE, Fla., May 4, 2009 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of online marketing for small businesses, today announced results for the first quarter ended March 31, 2009.

"We were pleased with the company's execution in the first quarter, which was highlighted by revenue and profitability that were above the high-end of our guidance. In addition, our customer churn remained at a record low level and we exited the quarter with approximately 265,000 customers, which was consistent with the end of the previous quarter," said David Brown, Chairman and CEO of Web.com. "Our continued focus on optimizing the company's efficiency is reflected by our strong adjusted EBITDA and cash flow generation. We are optimistic about Web.com's long-term growth opportunity and our emerging leadership position in the online marketing sector, which we believe is increasingly making Web.com the partner of choice for other influential companies focused on the small and medium-sized business market."

Summary of First Quarter 2009 Results:

 * Total revenue, calculated in accordance with U.S. generally
   accepted accounting principles (GAAP), was $27.8 million for the
   first quarter of 2009, above the high-end of the company's guidance
   and compared to $30.9 million for the first quarter of 2008.

 * For the first quarter, GAAP operating income was $877,000,
   representing an operating margin of 3.2% and compared to $938,000
   for the first quarter of 2008.

 * GAAP net income was $0.9 million for the first quarter of 2009,
   compared to $0.6 million in the first quarter of 2008.  GAAP net
   income per diluted share was $0.03 per share for the first quarter
   of 2009, an increase from $0.02 per share for the first quarter of
   2008.

 * Non-GAAP operating income was $4.8 million for the first quarter of
   2009, representing a non-GAAP operating margin of 17% and an
   increase from $4.6 million for the first quarter of 2008.

 * Non-GAAP net income was $4.8 million for the first quarter of 2009,
   consistent with the first quarter of 2008.  Non-GAAP net income per
   diluted share was $0.18 for the first quarter of 2009, above the
   high-end of the company's guidance and representing an increase
   from $0.16 per diluted share for the first quarter of 2008.

 * Adjusted EBITDA, which excludes the impact of stock-based
   compensation, restructuring charges and goodwill and asset
   impairment, was $5.6 million for the first quarter of 2009, an
   increase compared to $5.2 million for the first quarter of 2008.

 * Cash flows from operations were $5.7 million for the first quarter
   of 2009.  This represents an increase compared to ($1.0) million,
   and $2.9 million excluding the pay down of accrued restructuring
   expenses, for the first quarter of 2008.

Other Highlights:

 * Web.com's total net subscribers were approximately 265,000 at the
   end of the first quarter, consistent with the end of the prior
   quarter.

 * Customer churn remained at an all-time low of 3.9% in the first
   quarter.

 * The company repurchased 827,000 shares during the first quarter of
   2009, bringing the total number of shares repurchased to
   approximately 2,885,000 since the $20 million share repurchase
   program was authorized in the third quarter of 2008.  At the end of
   the first quarter, the company had reduced its common shares
   outstanding by 10% compared to the end of the third quarter 2008,
   and it continued to have approximately $10.5 million of available
   capacity in its share repurchase program.

Conference Call Information

Management will host a conference call to discuss Web.com's results and other matters related to the Company's business, including guidance related to future results, today May 4, 2009, at 5:00 p.m. (Eastern Time). To access this call, dial 888-686-9703 (domestic) or 913-312-6674 (international). A replay of this conference call will be available for a limited time at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 9077410. A webcast of this conference call will also be available for a limited time on the "Investor Relations" page of the Company's Web site, www.web.com

All per share numbers for non-GAAP net income per share are expressed on a weighted-average diluted per share basis. Non-GAAP net income excludes stock-based compensation expense, amortization expense related to acquisitions, restructuring charges, the deferred revenue adjustment due to purchase accounting, income tax expense, and includes an estimated cash tax rate to be paid during 2009. Non-GAAP operating income excludes stock-based compensation expense, amortization expense related to acquisitions, restructuring charges, and the deferred revenue adjustment related to purchase accounting. A reconciliation of GAAP financial measures to non-GAAP financial measures results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Use of Non-GAAP Financial Measures."

About Web.com

Web.com Group, Inc. (Nasdaq:WWWW) is a leading provider of online marketing for small businesses. Web.com offers a full range of online services, including Internet marketing and advertising, local search, search engine marketing, search engine optimization, lead generation, home contractor specific leads, website design and publishing, logo and brand development and eCommerce solutions, meeting the needs of small businesses anywhere along their lifecycle. For more information on the company, please visit http://www.web.com or call 1-800-GETSITE.

Note to Editors: Web.com is a registered trademark of Web.com Group, Inc.

Use of Non-GAAP Financial Measures

Some of the measures in this press release are non-GAAP financial measures within the meaning of the SEC Regulation G. Web.com believes presenting non-GAAP net income attributable to common stockholders, non-GAAP net income per share attributable to common stockholders and non-GAAP operating income is useful to investors, because it describes the operating performance of the company and helps investors gauge the company's ability to generate cash flow, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Company management uses these non-GAAP measures as important indicators of the company's past performance and in planning and forecasting performance in future periods. The non-GAAP financial information Web.com presents may not be comparable to similarly-titled financial measures used by other companies, and investors should not consider non-GAAP financial measures in isolation from, or in substitution for, financial information presented in compliance with GAAP. You are encouraged to review the reconciliation of non-GAAP financial measures to GAAP financial measures included elsewhere in this press release.

Relative to each of the non-GAAP measures the company presents above, management further sets forth its rationale as follows:

 * Non-GAAP Operating Income.  The Company excludes from non-GAAP
   operating income amortization of intangibles, fair value adjustment
   to deferred revenue, restructuring charges and stock-based
   compensation charges.  Management believes that excluding these
   non-cash charges assists investors in evaluating period-over-period
   changes in the Company's operating income without the impact of
   items that are not a result of the Company's day-to-day business
   and operations.

 * Non-GAAP Net Income and Non-GAAP Net Income Per Share.  The Company
   excludes from non-GAAP net income and non-GAAP net income per share
   amortization of intangibles, income tax expense, fair value
   adjustment to deferred revenue, restructuring charges and 
   stock-based compensation, and includes cash income tax expense, 
   because management believes that excluding such measures helps 
   investors better understand the Company's operating activities.

 * Adjusted EBITDA. The Company excludes from Adjusted EBITDA
   depreciation expense, amortization of intangibles, income tax,
   interest expense, interest income, and stock-based compensation,
   because management believes that excluding such items helps
   investors better understand the Company's operating activities.

In respect of the foregoing, Web.com provides the following supplemental information to provide additional context for the use and consideration of the non-GAAP financial measures used elsewhere in this press release:

 * Stock-based compensation.   These expenses consist of expenses for
   employee stock options and employee stock purchases under SFAS
   123(R). The Company excludes stock-based compensation expenses from
   our non-GAAP measures primarily because they are non-cash expenses.
   Prior to the adoption of SFAS 123(R) in fiscal 2006, the Company
   did not include expenses related to employee stock options and
   employee stock purchases directly in its financial statements, but
   elected, as permitted by SFAS 123, to disclose such expenses in the
   footnotes to its financial statements. As the Company applies SFAS
   123(R), it believes that it is useful to its investors to
   understand the impact of the application of SFAS 123(R) to its
   operational performance, liquidity and its ability to invest in
   research and development and fund acquisitions and capital
   expenditures. While stock-based compensation expense calculated in
   accordance with SFAS 123(R) constitutes an ongoing and recurring
   expense, such expense is excluded from non-GAAP results because it
   is not an expense that typically requires or will require cash
   settlement by the Company and because such expense is not used by
   management to assess the core profitability of the Company's
   business operations. The Company further believes these measures
   are useful to investors in that they allow for greater transparency
   to certain line items in our financial statements. In addition,
   excluding this item from various non-GAAP measures facilitates
   comparisons to the Company's competitors' operating results.

 * Amortization of intangibles.  The Company incurs amortization of
   acquired intangibles under SFAS 141. Acquired intangibles primarily
   consist of customer relationships, non-compete agreements, trade
   names, and developed technology. The Company expects to amortize
   for accounting purposes the fair value of the acquired intangibles
   based on the pattern in which the economic benefits of the
   intangible assets will be consumed as revenue is generated.
   Although the intangible assets generate revenue for the Company,
   the item is excluded because this expense is non-cash in nature and
   because the Company believes the non-GAAP financial measures
   excluding this item provide meaningful supplemental information
   regarding the Company's operational performance, liquidity and its
   ability to invest in research and development and fund acquisitions
   and capital expenditures. In addition, excluding this item from
   various non-GAAP measures facilitates management's internal
   comparisons to the Company's historical operating results and
   comparisons to the Company's competitors' operating results.

 * Depreciation expense.  The Company incurs depreciation expense
   associated with its fixed assets.  Although the fixed assets
   generate revenue for the Company, the item is excluded because this
   expense is non-cash in nature and because the Company believes the
   non-GAAP financial measures excluding this item provide meaningful
   supplemental information regarding the Company's operational
   performance, liquidity and its ability to invest in research and
   development and fund acquisitions and capital expenditures.  In
   addition, excluding this item from certain non-GAAP measures
   facilitates management's internal comparisons to the Company's
   historical operating results and comparisons to the Company's
   competitors' operating results.

 * Interest expense.  The Company incurs interest expense related to
   the indebtedness of the Company.  This item is excluded because the
   Company believes the non-GAAP measures excluding this item provide
   meaningful supplemental information regarding the Company's
   operational performance.  In addition, excluding this item from
   various non-GAAP measures facilitates management's internal
   comparisons to the Company's historical operating results and
   comparisons to the Company's competitors' operating results.

 * Interest income.  The Company earns interest income related to its
   cash and cash equivalents.  This item is excluded because the
   Company believes the non-GAAP measures excluding this item provide
   meaningful supplemental information regarding the Company's
   operational performance.  In addition, excluding this item from
   various non-GAAP measures facilitates management's internal
   comparisons to the Company's historical operating results and
   comparisons to the Company's competitors' operating results.

 * Restructuring charges.  The Company has recorded restructuring
   charges.  The Company excludes the impact of these expenses from
   its non-GAAP measures, because such expense is not used by
   management to assess the core profitability of the Company's
   business operations.

 * Income tax expense.  Due to the magnitude of the Company's
   historical net operating losses and related deferred tax asset, the
   Company excludes income tax expense from its non-GAAP measures
   primarily because they are not indicative of the cash tax paid by
   the Company and therefore are not reflective of ongoing operating
   results. Further, excluding this non-cash item from non-GAAP
   measures facilitates management's internal comparisons to the
   Company's historical operating results.  The Company also excludes
   income tax expense altogether from certain non-GAAP financial
   measures because the Company believes that the non-GAAP measures
   excluding this item provide meaningful supplemental information
   regarding the Company's operational performance and facilitates
   management's internal comparisons to the Company's historical
   operating results and comparisons to the Company's competitors'
   operating results.

 * Fair value adjustment to deferred revenue.  The Company has
   recorded a fair value adjustment to acquired deferred revenue in
   accordance with SFAS 141. The Company excludes the impact of this
   adjustment from its non-GAAP measures, because doing so results in
   non-GAAP revenue and non-GAAP net income which are reflective of
   ongoing operating results and more comparable to historical
   operating results, since the majority of the Company's revenue is
   recurring subscription revenue. Excluding the fair value adjustment
   to deferred revenue therefore facilitates management's internal
   comparisons to the Company's historical operating results.

Forward-Looking Statements

This press release includes certain "forward-looking statements" including, without limitation, statements regarding Web.com's expectations about its future financial performance and market position, that are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this presentation that are not historical facts. These statements are sometimes identified by words such as "believe" or words of similar meaning. As a result of the ultimate outcome of such risks and uncertainties, Web.com's actual results could differ materially from those anticipated in these forward-looking statements. These statements are based on our current beliefs or expectations, and there are a number of important factors that could cause the actual results or outcomes to differ materially from those indicated by these forward-looking statements, including, without limitation, our ability to integrate Web.com businesses, our ability to maintain our sales efficiency, our ability to maintain our existing, and develop new, strategic relationships, the number of our net subscriber additions and our monthly customer turnover. These and other risk factors are set forth under the caption "Risk Factors" in Web.com's Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission, which is available on a website maintained by the Securities and Exchange Commission at www.sec.gov. Web.com expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein as a result of new information, future events or otherwise.

                         Web.com Group, Inc.
                 Consolidated Statements of Operations
                 (in thousands except per share data)


                                                Three Months Ended
                                                     March 31,
                                              ------------------------
                                                  2009        2008
                                              (unaudited)  (unaudited)
                                              -----------  -----------
 Revenue:
  Subscription                                $   26,017   $   29,731
  License                                          1,266          449
  Professional services                              553          681
                                              -----------  -----------
    Total revenue                                 27,836       30,861

 Cost of revenue (excluding depreciation
  and amortization shown separately below):

  Subscription (a)                                 9,309       10,903
  License                                             87           93
  Professional services                              300          375
                                              -----------  -----------
    Total cost of revenue                          9,696       11,371
                                              -----------  -----------
 Gross profit                                     18,140       19,490

 Operating expenses:
  Sales and marketing (a)                          5,775        7,463
  Research and development (a)                     2,076        2,638
  General and administrative (a)                   6,062        5,102
  Depreciation and amortization                    3,350        3,349
                                              -----------  -----------
    Total operating expenses                      17,263       18,552
                                              -----------  -----------
 Income from operations                              877          938

 Other income:
  Interest, net                                       63          256
                                              -----------  -----------
 Income before income taxes                          940        1,194
 Income tax expense                                   18          644
                                              -----------  -----------
 Net income                                   $      922   $      550
                                              ===========  ===========

 Net income per common share

 Basic                                        $     0.04   $     0.02
                                              ===========  ===========
 Diluted                                      $     0.03   $     0.02
                                              ===========  ===========
 Weighted-average number of shares
  used in per share amounts:

 Basic                                            25,603       27,549
 Diluted                                          26,429       30,619

 (a) Stock based compensation included above:
     Subscription (cost of revenue)           $      105   $       80
     Sales and marketing                             225          210
     Research and development                        125          103
     General and administration                      869          538
                                              -----------  -----------
 Total                                        $    1,324   $      931
                                              ===========  ===========
                           Web.com Group, Inc.
                       Consolidated Balance Sheets
                  (in thousands except per share data)


                                               March 31,     Dec. 31,
                                                 2009          2008
                                              (unaudited)   (audited)
                                              -----------  -----------
 Assets
 Current assets:
  Cash and cash equivalents                   $   36,891   $   34,127
  Accounts receivable, net of allowance
   $554 and $645, respectively                     3,928        5,019
  Inventories, net of reserves of $84 and $78,
   respectively                                       27           39
  Prepaid expenses                                 1,597        1,430
  Prepaid marketing fees                             642          665
  Deferred taxes                                   1,094        1,093
  Other current assets                               129          134
                                              -----------  -----------
 Total current assets                             44,308       42,507
 Restricted investments                              316          316
 Property and equipment, net                       7,665        8,204
 Goodwill                                          9,225        9,000
 Intangible assets, net                           59,472       62,085
 Other assets                                        585          383
                                              -----------  -----------
 Total assets                                 $  121,571   $  122,495
                                              ===========  ===========

 Liabilities and stockholders' equity
 Current liabilities:
  Accounts payable                            $    1,677   $    1,406
  Accrued expenses                                 6,580        6,230
  Accrued restructuring costs and other
   reserves                                        2,372        2,619
  Deferred revenue                                 7,288        7,831
  Accrued marketing fees                             229          263
  Notes payable                                       30           59
  Other current liabilities                          140          128
                                              -----------  -----------
 Total current liabilities                        18,316       18,536

 Accrued rent expense                                564          535
 Deferred revenue                                    161          180
 Accrued restructuring costs and other
  reserves                                           907        1,214
 Deferred tax liabilites                           2,712        2,712
 Other liabilities                                    25           25
                                              -----------  -----------
 Total liabilities                                22,685       23,202


 Stockholders' equity
 Common stock, $0.001 par value;
  150,000,000 shares authorized; 28,093,759
  and 28,093,759 shares issued and 26,371,451
  and 26,633,436 shares outstanding at
  March 31, 2009 and December 31, 2008,
  respectively                                        26           27
 Additional paid-in capital                      256,699      256,763
 Treasury Stock, at cost, 1,722,308 and
  1,460,323 shares at March 31, 2009 and
  December 31, 2008, respectively                 (4,747)      (3,483)
 Accumulated deficit                            (153,092)    (154,014)
                                              -----------  -----------
 Total stockholders' equity                       98,886       99,293
                                              -----------  -----------
 Total liabilities and stockholders' equity   $  121,571   $  122,495
                                              ===========  ===========
                           Web.com Group, Inc.
               Reconciliation of GAAP to Non-GAAP Results
                  (in thousands except per share data)
                               (unaudited)

                                                Three Months Ended
                                                       March 31,
                                              ------------------------
                                                 2009          2008
                                              -----------  -----------
 Reconciliation of GAAP net income to
   non-GAAP net income

 GAAP net income                              $      922   $      550
 Amortization of intangibles                       2,613        2,617
 Loss on disposal of fixed assets                      4           --
 Income tax expense                                   18          644
 Cash income tax expense                             (92)         (59)
 Fair value adjustment to deferred revenue            30          140
 Stock based compensation                          1,324          931
                                              -----------  -----------
 Non-GAAP net income                          $    4,819   $    4,823
                                              ===========  ===========
 
 Reconciliation of GAAP basic net income 
  per share to non-GAAP basic net income 
  per share

 Basic GAAP net income per share              $     0.04   $     0.02
 Amortization of intangibles per share              0.10         0.10
 Loss on disposal of fixed assets per share         0.00           --
 Income tax expense per share                       0.00         0.02
 Cash income tax expense per share                 (0.00)       (0.00)
 Fair value adjustment to deferred
   revenue per share                                0.00         0.01
 Stock based compensation per share                 0.05         0.03
                                              -----------  -----------
 Basic Non-GAAP net income per share          $     0.19   $     0.18
                                              ===========  ===========
 
 Reconciliation of GAAP diluted net income
  per share to non-GAAP net income per share

 Fully diluted shares:
 Common stock                                     25,603       27,549
 Diluted stock options                               804        2,730
 Diluted restricted stock                             21           --
 Warrants                                             --          201
 Escrow shares                                         1          139
                                              -----------  -----------
     Total                                        26,429       30,619
                                              ===========  ===========
 
 Diluted GAAP net income per share            $     0.03   $     0.02
 Amortization of intangibles per share              0.10         0.09
 Loss on disposal of fixed assets per share         0.00           --
 Income tax expense per share                       0.00         0.02
 Cash income tax expense per share                 (0.00)       (0.00)
 Fair value adjustment to deferred revenue
   per share                                        0.00         0.00
 Stock based compensation per share                 0.05         0.03
                                              -----------  -----------
 Diluted Non-GAAP net income per share              0.18     $   0.16
                                              ===========  ===========
 
 Reconciliation of GAAP operating income
   to non-GAAP operating income
 GAAP operating income                        $      877   $      938
 Amortization of intangibles                       2,613        2,617
 Loss on disposal of fixed assets                      4           --
 Fair value adjustment to deferred revenue            30          140
 Stock based compensation                          1,324          931
                                              -----------  -----------
 Non-GAAP operating income                    $    4,848   $    4,626
                                              ===========  ===========
 
 Reconciliation of GAAP operating margin
  to non-GAAP operating margin

 GAAP operating margin                                 3%           3%
 Amortization of intangibles                           9%           8%
 Loss on disposal of fixed assets                      0%           0%
 Fair value adjustment to deferred revenue             0%           1%
 Stock based compensation                              5%           3%
                                              -----------  -----------
 Non-GAAP operating margin                            17%          15%
                                              ===========  ===========
 
 Reconciliation of GAAP operating income
  to adjusted EBITDA

 GAAP operating income                        $      877   $      938
 Depreciation and amortization                     3,350        3,349
 Stock based compensation                          1,324          931
                                              -----------  -----------
 Adjusted EBITDA                              $    5,551   $    5,218
                                              ===========  ===========
                           Web.com Group, Inc.
                  Consolidated Statement of Cash Flows
                             (in thousands)


                                                 Three Months Ended
                                                      March 31,
                                              ------------------------
                                                  2009        2008
                                              (unaudited)   (audited)
                                              -----------  -----------
 Cash flows from operating activities

 Net income                                   $      922   $      550
 Adjustments to reconcile net income to
  net cash provided by (used in)
  operating activities:
 Depreciation and amortization                     3,350        3,349
 Loss on disposal of assets                            4            3
 Stock-based compensation expense                  1,324          931
 Deferred income tax                                  --          586
 Changes in operating assets and liabilities:
   Accounts receivable                             1,091         (360)
   Inventories                                        12            3
   Prepaid expenses and other assets                (341)       2,818
   Accounts payable, accrued expenses
     and other liabilities                          (110)      (9,084)
   Deferred revenue                                 (562)         185
                                              -----------  -----------
 Net cash provided by (used in)
  operating activities                             5,690       (1,019)

 Cash flows from investing activities

 Business acquisition, net of cash received           --           (8)
 Proceeds from sale of investment                     --        5,500
 Purchase of investment                               --         (996)
 Change in restricted investments                     --        1,228
 Purchase of property and equipment                 (242)        (522)
 Investment in intangible assets                      (2)          (1)
                                              -----------  -----------
 Net cash (used in) provided by investing
  activities                                        (244)       5,201

 Cash flows from financing activities

 Stock issuance costs                                 (5)          (5)
 Common stock repurchased                         (2,669)          --
 Payment of debt obligations                         (29)      (1,106)
 Proceeds from exercise of stock options              21          737
                                              -----------  -----------
 Net cash (used in) financing activities          (2,682)        (374)
                                              -----------  -----------
 Net increase in cash and cash equivalents         2,764        3,808
 Cash and cash equivalents, beginning
  of period                                       34,127       29,746
                                              -----------  -----------
 Cash and cash equivalents, end of period     $   36,891   $   33,554
                                              -----------  -----------
 Supplemental cash flow information:

  Interest paid                               $        1   $       21
                                              ===========  ===========
  Income tax paid                             $       36   $       73
                                              ===========  ===========
CONTACT:  ICR
          Kori Doherty
          617-956-6730
          kori.doherty@icrinc.com

 

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