Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934

 
Date of Report (Date of earliest event reported): November 7, 2017
 
                
Web.com Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
000-51595
94-3327894
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
 
 
12808 Gran Bay Parkway West, Jacksonville, FL
32258
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (904) 680-6600
 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







 Item 2.02 Results of Operations and Financial Condition.

On November 7, 2017, Web.com Group, Inc. issued a press release reporting financial results for the quarter ended September 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information furnished in Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, and shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.
 
(c)
Exhibits
Press release dated November 7, 2017 containing Web.com Group, Inc.'s results of operations for the quarter ended September 30, 2017.
 






 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Web.com Group, Inc.
 
(Registrant)
 
 
 
 
Date: November 7, 2017
/s/ Matthew P. McClure
 
Matthew P. McClure, Secretary
 
 
 
 
 



Exhibit


        
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11877331&doc=3
Web.com Group, Inc.
12808 Gran Bay Parkway West
Jacksonville, FL 32258
T: (904) 680-6600 F: (904) 880-0350
NASDAQ: WEB

Web.com Reports Third Quarter 2017 Financial Results

Strong financial and operating performance exceeding profitability expectations and at the high end of revenue guidance
Repurchased 3 million shares for $74.4 million

JACKSONVILLE, Fla. - November 7, 2017 - Web.com Group, Inc. (NASDAQ: WEB), a leading global provider of a full range of Internet services and online marketing solutions for small businesses, today announced results for the third quarter ended September 30, 2017.

"Web.com reported third quarter financial results that exceeded our profitability expectations and were at the high end of our revenue guidance. We made good progress executing against our strategic objectives for 2017 and saw positive momentum across our product groupings. Retail had a stronger than anticipated quarter, vertical market solutions gained traction and Web Brand Networks, our franchise and multi-location channel, benefited from our land and expand strategy," said David L. Brown, chairman, chief executive officer and president of Web.com.

Brown added, "We also continued to utilize our strong free cash flow and balance sheet by repurchasing 3 million shares, representing approximately 6% of the company's outstanding common stock, which will benefit current and future shareholders going forward. We are focused on building on the progress we have made so far in 2017 to position the company for long-term growth."

Summary of Third Quarter 2017 Financial Results:

Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $188.6 million for the third quarter of 2017, compared to $190.7 million for the third quarter of 2016. Non-GAAP revenue was $189.8 million for the third quarter of 2017, compared to $192.8 million in the comparable prior year period. Results were at the high end of both GAAP and non-GAAP revenue guidance of $185.8 to $188.8 million and $187 to $190 million, respectively.

GAAP operating income was $23.6 million for the third quarter of 2017, representing a 13% GAAP operating margin, compared to $18.1 million, representing a 9% GAAP operating margin, for the third quarter of 2016. Non-GAAP operating income was $43.5 million for the third quarter of 2017, representing a 23% non-GAAP operating margin, compared to $43.9 million for the third quarter of 2016, representing a 23% non-GAAP operating margin.

GAAP net income was $8.3 million, or $0.16 per diluted share, for the third quarter of 2017, representing a 4% GAAP net income margin. GAAP net income was $3.3 million, or $0.07 per diluted share, for the third quarter of 2016, representing a 2% GAAP net income margin.






Adjusted EBITDA was $48.8 million for the third quarter of 2017, representing an adjusted EBITDA margin of 26%, surpassing the high end of the Company's adjusted EBITDA guidance of $46.5 to $48.5 million. The Company had adjusted EBITDA of $49.6 million for the third quarter of 2016, representing a 26% adjusted EBITDA margin.

The Company generated cash from operations of $33.9 million for the third quarter of 2017, compared to $44.5 million of cash flow from operations for the third quarter of 2016.

Third Quarter Operating Highlights:

Web.com's total net subscribers were approximately 3,460,000 at the end of the third quarter of 2017, declining approximately 30,000 from the end of the second quarter of 2017. The net subscriber reduction during the three months ended September 30, 2017, includes a decrease of approximately 6,000 subscribers that is an adjustment to final subscriber counts related to the DonWeb.com acquisition from the first quarter of 2017.

Web.com's average revenue per user (ARPU) was $18.04 for the third quarter of 2017 compared to $18.47 for the third quarter of 2016. ARPU increased sequentially during the third quarter of 2017 from $17.72 during the second quarter of 2017.

Web.com's trailing twelve month customer retention rate was 84.4% for the third quarter of 2017.

Conference Call Information
Management will host a conference call today, November 7, 2017, at 5:00 p.m. ET, to discuss Web.com's third quarter financial results and current business outlook. There will be an accompanying slide presentation which will be available on the Investor Relations page of Web.com's website (http://ir.web.com), along with a live webcast and replay of the call. To access the call, dial 888-442-4145 (domestic) or 719-457-2618 (international). A replay of this conference call will be available until November 21, 2017, at 844-512-2921 (domestic) or 412-317-6671 (international). The replay conference ID is 4120995.

About Web.com
Web.com Group, Inc. (Nasdaq: WEB) is a global provider of a full range of Internet services to small businesses to help them compete and succeed online. Web.com meets the needs of small businesses anywhere along their lifecycle with affordable, subscription-based solutions including domains, hosting, website design and management, search engine optimization, online marketing campaigns, local sales leads, social media, mobile products, eCommerce solutions and call center services. For more information, please visit www.web.com; follow the company on Twitter @webdotcom or on Facebook at www.facebook.com/web.com.


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 measures is useful to investors, because it describes the operating performance of the Company, in ways that management views or uses to assess the performance of the Company. Web.com's 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 Web.com presents, management further sets forth its rationale as follows:
Non-GAAP Revenue. Web.com excludes from non-GAAP revenue the impact of the fair value adjustment to amortized deferred revenue because management believes that excluding such measures helps management and investors better understand the Company's revenue trends.
Non-GAAP Operating Income and Non-GAAP Operating Margin. Web.com excludes from non-GAAP operating income and non-GAAP operating margin, amortization of intangibles, asset impairment, stock-based compensation charges, restructuring expenses, corporate development expenses and fair value adjustment to deferred revenue and deferred expense because management believes that adjusting for such measures helps management and investors better understand the Company's operating activities.
Adjusted EBITDA and Adjusted EBITDA Margin. Web.com excludes from adjusted EBITDA and adjusted EBITDA margin depreciation and amortization expense, loss on sale of assets, asset impairment, income tax provision, interest expense, interest income, stock-based compensation, fair value adjustments to deferred revenue and deferred expense, corporate development expenses and restructuring expenses, because management believes that excluding such items helps investors better understand the Company's operating activities.
Non-GAAP Cost of Revenue (excluding depreciation and amortization). Web.com excludes from non-GAAP cost of revenue (excluding depreciation and amortization) the fair value adjustment to deferred expense and stock based compensation charges because management believes that adjusting for such measures helps management and investors better understand the company's operating activities.
Free Cash Flow. Free cash flow is a non-GAAP financial measure that Web.com uses and defines as net cash provided by operating activities less capital expenditures. The Company considers free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for investment opportunities.
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 awards under Accounting Standards Codification ("ASC") 718-10. While stock-based compensation expense calculated in accordance with ASC 718-10 constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because such expense is not used by management to assess the core profitability of the Company's business operations. Web.com further believes these measures are useful to investors in that they allow for greater transparency to certain line items in the Company's financial statements. In addition, when management performs internal comparisons to Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.
Amortization of intangibles. Web.com incurs amortization of acquired intangibles under ASC 805-10-65. Acquired intangibles primarily consist of customer relationships, customer lists, non-compete agreements, trade names, and developed technology. Web.com 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, the Company believes the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, when management performs internal comparisons to Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.
Depreciation expense. Web.com records depreciation expense associated with its fixed assets. Although its fixed assets generate revenue for Web.com, the item is excluded because management believes certain non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, when management performs internal comparisons to





Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.
Restructuring expense. Web.com has recorded restructuring expenses and 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.
Fair value adjustment to deferred revenue and deferred expense. Web.com has recorded a fair value adjustment to acquired deferred revenue and deferred expense in accordance with ASC 805-10-65. Web.com excludes the impact of these adjustments 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 and deferred expense therefore facilitates management's internal comparisons to Web.com's historical operating results.
Corporate development expenses. Web.com incurred expenses relating to acquisitions and the successful integration of acquisitions. Web.com 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.
Gains or losses from asset sales or impairment and certain other transactions. Web.com excludes the impact of asset sales or impairment and certain other transactions including debt extinguishments and the sale of equity method investment from its non-GAAP measures because the impact of these items is not considered part of the company's ongoing operations.
Monthly average revenue per user, or ARPU. ARPU is a metric the Company measures on a quarterly basis. The Company defines ARPU as quarterly non-GAAP subscription revenue divided by the average of the number of subscribers at the beginning of the quarter and the number of subscribers at the end of the quarter, divided by three months. The Company excludes from subscription revenue the impact of the fair value adjustments to deferred revenue resulting from acquisition-related write downs.

Forward-Looking Statements
This press release includes "forward-looking statements" including, without limitation, the statements regarding whether the repurchase of 3 million shares will benefit current and future shareholders going forward and building on progress made so far in 2017 to position the company for long-term growth 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. 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 Web.com's 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, risks related to the successful offering of the products and services of Web.com; and other risks that may impact Web.com's business. 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, 2016 and Form 10-Q for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission, which are 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.

Contacts
Investors:
Ira Berger
904-680-6909
Ira.Berger@web.com    

Media:
Brian Wright
904-371-6856
Brian.Wright@web.com

Source: Web.com





Web.com Group, Inc.
Consolidated Statements of Comprehensive Income
(in thousands, except for per share data)
(unaudited)


Three months ended September 30,
 
Nine months ended September 30,

2017
 
2016
 
2017
 
2016




 



Revenue
$
188,567


$
190,686

 
$
560,416


$
523,303

 
 
 
 
 
 
 
 
Cost of Revenue and Operating Expenses:
 
 
 
 
 
 
 
Cost of revenue (excluding depreciation and amortization)
59,414


58,380

 
175,863


167,189

Sales and marketing
51,026


55,304

 
151,168


157,867

Technology and development
16,331


15,538

 
50,655


47,896

General and administrative
20,168


19,094

 
61,274


54,391

Restructuring expense
424


1,133

 
736


2,047

Asset Impairment

 
1,979

 
143

 
1,979

Depreciation and amortization
17,601


21,165

 
53,435


59,351

Total cost of revenue and operating expenses
164,964


172,593

 
493,274


490,720

Income from operations
23,603


18,093

 
67,142


32,583





 



Interest expense, net
(8,567
)

(8,270
)
 
(24,603
)

(22,530
)
Net income before income taxes
15,036


9,823

 
42,539


10,053

Income tax expense
(6,735
)

(6,477
)
 
(19,676
)

(7,976
)
Net income
$
8,301


$
3,346

 
$
22,863


$
2,077





 



Other comprehensive income:



 



Foreign currency translation adjustments
26


(198
)
 
1


(1,405
)
Unrealized gain on investments, net of tax



 
1


29

Total comprehensive income
$
8,327


$
3,148

 
$
22,865


$
701





 



Basic earnings per share:



 



Net income per basic common share
$
0.17


$
0.07

 
$
0.47


$
0.04

Diluted earnings per share:



 



Net income per diluted common share
$
0.16


$
0.07

 
$
0.45


$
0.04

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






Web.com Group, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)









September 30, 2017

December 31, 2016

Assets

(unaudited)

 

 

 

 

Current assets:

 
 
 

Cash and cash equivalents

$
7,744


$
20,447


Accounts receivable, net of allowance of $1,473 and $1,695, respectively

24,539


20,567


Prepaid expenses

15,157


12,311


Deferred expenses

63,649


60,217


Other current assets

1,666


1,872


Total current assets

112,755


115,414


 
 
 
 
 

Property and equipment, net

57,046


53,132


Deferred expenses

47,393


49,127


Goodwill

882,423


871,751


Intangible assets, net

378,763


413,127


Other assets

22,995


11,282


Total assets

$
1,501,375


$
1,513,833


 
 
 
 
 

Liabilities and stockholders' equity

 
 
 

Current liabilities:

 
 
 

Accounts payable

$
20,422


$
19,619


Accrued expenses

13,171


14,475


Accrued compensation and benefits

19,430


18,307


Deferred revenue

238,274


230,206


Current portion of debt

31,266


16,847


Deferred consideration
 
23,122

 
20,244

 
Other liabilities

5,553


5,034


Total current liabilities

351,238


324,732


 
 
 
 
 

Deferred revenue

189,845


195,859


Long-term debt

634,377


647,294


Deferred tax liabilities

69,595


80,135


Other long-term liabilities

19,627


30,361


Total liabilities

1,264,682


1,278,381


Stockholders' equity:

 
 
 

Common stock, $0.001 par value per share: 150,000,000 shares authorized, 48,657,493 and 50,278,137 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

49


50


Additional paid-in capital

582,677


578,486


Treasury stock at cost, 4,509,824 and 3,146,012 shares at September 30, 2017 and December 31, 2016, respectively

(116,255
)

(62,430
)

Accumulated other comprehensive loss

(4,018
)

(4,020
)

Accumulated deficit (1)

(225,760
)

(276,634
)

Total stockholders' equity

236,693


235,452


Total liabilities and stockholders' equity

$
1,501,375


$
1,513,833


(1) The Company adopted Accounting Standards Update ("ASU") 2016-09 on January 1, 2017 using the modified retrospective transition method and recorded a $28.0 million adjustment for previously unrecognized excess tax benefits in opening accumulated deficit on January 1, 2017.
 





Web.com Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Cash flows from operating activities
 
 
 
 
 
 
 
Net income
$
8,301

 
$
3,346

 
$
22,863

 
$
2,077

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 


Depreciation and amortization
17,601

 
21,165

 
53,435

 
59,351

Stock based compensation
5,698

 
5,008

 
17,358

 
15,208

Deferred income taxes
5,482

 
5,609

 
16,658

 
6,208

Amortization of debt issuance costs and other
4,138

 
3,630

 
11,537

 
10,315

Asset impairment

 
1,979

 
143

 
1,979

Changes in operating assets and liabilities:


 
 
 
 
 
 
Accounts receivable, net
(4,239
)
 
(774
)
 
(3,254
)
 
(2,532
)
Prepaid expenses and other assets
(679
)
 
368

 
(5,895
)
 
(10,567
)
Deferred expenses
516

 
1,603

 
(1,019
)
 
(983
)
Accounts payable
(450
)
 
1,673

 
(619
)
 
88

Accrued expenses and other liabilities
(364
)
 
(1,586
)
 
(17
)
 
(2,105
)
Accrued compensation and benefits
4,010

 
5,069

 
338

 
(2,306
)
Deferred revenue
(6,150
)
 
(2,631
)
 
(698
)
 
13,014

Net cash provided by operating activities
33,864

 
44,459

 
110,830

 
89,747

 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
Business acquisitions

 

 
(8,587
)
 
(303,262
)
Capital expenditures
(6,219
)
 
(9,368
)
 
(16,792
)
 
(17,674
)
Other

 
(247
)
 

 
(1,547
)
Net cash used in investing activities
(6,219
)
 
(9,615
)
 
(25,379
)
 
(322,483
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
Stock issuance costs
(17
)
 
(16
)
 
(21
)
 
(22
)
Common stock repurchased
(79
)
 
(1,013
)
 
(3,638
)
 
(4,246
)
Payments of long-term debt
(15,000
)
 

 
(42,954
)
 
(4,937
)
Payments on revolving credit facility
(10,000
)
 
(23,000
)
 
(66,313
)
 
(50,563
)
Proceeds from exercise of stock options
4,149

 
2,611

 
13,128

 
3,816

Deferred consideration payment

 

 
(18,933
)
 

Proceeds from borrowings on long-term debt

 

 
50,000

 
200,000

Proceeds from borrowings on revolving credit facility
42,000

 

 
49,000

 
115,000

Debt issuance costs
(8
)
 

 
(1,935
)
 
(5,700
)
Common stock purchases under stock repurchase plan
(74,382
)
 
(555
)
 
(76,463
)
 
(17,464
)
Net cash (used in) provided by financing activities
(53,337
)
 
(21,973
)
 
(98,129
)
 
235,884

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash
(13
)
 
(3
)
 
(25
)
 
(36
)
 
 
 
 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(25,705
)
 
12,868

 
(12,703
)
 
3,112

Cash and cash equivalents, beginning of period
33,449

 
8,950

 
20,447

 
18,706

Cash and cash equivalents, end of period
$
7,744

 
$
21,818

 
$
7,744

 
$
21,818

 
 
 
 
 
 
 
 





Web.com Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Supplemental cash flow information
 
 
 
 
 
 
 
Interest paid
$
4,868

 
$
5,370

 
$
13,680

 
$
12,221

Income taxes paid
$
1,590

 
$
741

 
$
3,163

 
$
2,787







Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 
 


 
Three months ended September 30,

Nine months ended September 30,
 
2017

2016

2017

2016
Reconciliation of GAAP revenue to non-GAAP revenue
 
 
 
 
 
 
 
GAAP revenue
$
188,567


$
190,686


$
560,416


$
523,303

   Fair value adjustment to deferred revenue
1,202


2,108


4,239


16,704

Non-GAAP revenue
$
189,769


$
192,794


$
564,655


$
540,007

 
 
 
 
 
 
 
 
Reconciliation of GAAP operating income to non-GAAP operating income
 
 

 
 
 
 
GAAP operating income
$
23,603

 
$
18,093


$
67,142

 
$
32,583

   Amortization of intangibles
12,325


15,461


37,288


43,608

 Loss on sale of assets
2

 

 
2

 

   Asset impairment


1,979


143


1,979

   Stock based compensation
5,698


5,008


17,358


15,208

   Restructuring expense
424


1,133


736


2,047

   Corporate development
249


57


1,016


3,925

   Fair value adjustment to deferred revenue
1,202


2,108


4,239


16,704

   Fair value adjustment to deferred expense
37


80


140


232

Non-GAAP operating income
$
43,540

 
$
43,919


$
128,064

 
$
116,286

 
 
 
 
 
 
 
 
Reconciliation of GAAP operating margin to non-GAAP operating margin
 
 
 
 
 
 
 
GAAP operating margin
13
%
 
9
%
 
12
%
 
6
%
   Amortization of intangibles
6

 
8

 
7

 
8

 Loss on sale of assets

 

 

 

   Asset impairment

 
1

 

 

   Stock based compensation
3

 
3

 
3

 
3

   Restructuring expense

 
1

 

 
1

   Corporate development

 

 

 
1

   Fair value adjustment to deferred revenue
1

 
1

 
1

 
3

   Fair value adjustment to deferred expense

 

 

 

Non-GAAP operating margin
23
%
 
23
%
 
23
%
 
22
%
 
 
 
 
 
 
 
 





Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 
 


 
Three months ended September 30,

Nine months ended September 30,
 
2017

2016

2017

2016

 

 
Reconciliation of GAAP net income to adjusted EBITDA







GAAP net income
$
8,301

 
$
3,346

 
$
22,863

 
$
2,077

   Depreciation and amortization
17,601


21,165


53,435


59,351

 Loss on sale of assets
2

 

 
2

 

   Asset impairment


1,979


143


1,979

   Stock based compensation
5,698


5,008


17,358


15,208

   Restructuring expense
424


1,133


736


2,047

   Corporate development
249


57


1,016


3,925

   Fair value adjustment to deferred revenue
1,202


2,108


4,239


16,704

   Fair value adjustment to deferred expense
37


80


140


232

   Interest expense, net
8,567

 
8,270

 
24,603

 
22,530

   Income tax expense
6,735

 
6,477

 
19,676

 
7,976

Adjusted EBITDA
$
48,816


$
49,623


$
144,211


$
132,029

 
 
 
 
 
 
 
 
Reconciliation of GAAP net income margin to adjusted EBITDA margin







GAAP net income margin
4
%

2
%

4
%

%
   Depreciation and amortization
9


11


9


11

 Loss on sale of assets

 

 

 

   Asset impairment


1





   Stock based compensation
3


3


3


3

   Restructuring expense


1




1

   Corporate development






1

   Fair value adjustment to deferred revenue
1


1


1


3

   Fair value adjustment to deferred expense







   Interest expense, net
5


4


5


4

   Income tax expense
4


3


4


1

Adjusted EBITDA margin
26
%

26
%

26
%

24
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of net cash provided by operating activities to free cash flow
 
 
 
 
 
 
 
Net cash provided by operating activities
$
33,864

 
$
44,459


$
110,830


$
89,747

   Capital expenditures
(6,219
)
 
(9,368
)

(16,792
)

(17,674
)
Free cash flow
$
27,645


$
35,091


$
94,038


$
72,073









Net cash used in investing activities
$
(6,219
)
 
$
(9,615
)

$
(25,379
)

$
(322,483
)
Net cash (used in) provided by financing activities
$
(53,337
)
 
$
(21,973
)

$
(98,129
)

$
235,884






Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 
 


 
Three months ended September 30,

Nine months ended September 30,
 
2017

2016

2017

2016
Reconciliation of GAAP cost of revenue (excluding depreciation and amortization) to non-GAAP cost of revenue (excluding depreciation and amortization)



 
 
 
 
Cost of revenue (excluding depreciation and amortization)
$
59,414


$
58,380

 
$
175,863

 
$
167,189

  Less: Fair value adjustment to deferred expenses
(37
)

(80
)
 
(140
)
 
(232
)
  Less: Stock based compensation
(275
)

(270
)
 
(826
)
 
(1,033
)
Non-GAAP cost of revenue (excluding depreciation and amortization)
$
59,102


$
58,030

 
$
174,897

 
$
165,924





 
 
 
 
Reconciliation of GAAP revenue to non-GAAP subscription revenue used in ARPU
 
 
 




GAAP revenue
$
188,567


$
190,686


 
 
 
Fair value adjustment to deferred revenue
1,202


2,108


 
 
 
    Non-GAAP revenue
$
189,769


$
192,794


 
 
 
    Professional services and other revenue
(1,809
)

(1,915
)

 
 
 
Non-GAAP subscription revenue used in ARPU
$
187,960


$
190,879


 
 
 
   Average subscribers (in thousands)
3,472


3,445


 
 
 
ARPU (Non-GAAP subscription revenue per subscriber over 3 month period)
$
18.04


$
18.47


 
 
 






Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 
 
 
 
 
 
 
 
Reconciliation of GAAP revenue to non-GAAP subscription revenue used in ARPU
Three months ended June 30, 2017






GAAP revenue
$
186,731







Fair value adjustment to deferred revenue
1,328







    Non-GAAP revenue
$
188,059







    Professional services and other revenue
(2,220
)






Non-GAAP subscription revenue used in ARPU
$
185,839







   Average subscribers (in thousands)
3,497







ARPU (Non-GAAP subscription revenue per subscriber over 3 month period)
$
17.72















Reconciliation of GAAP revenue to non-GAAP revenue
Guidance for three months ended September 30, 2017 as of August 3, 2017




GAAP revenue
$
185,800

-
$
188,800





Fair value adjustment to deferred revenue
1,200

 
1,200





Non-GAAP revenue
$
187,000

-
$
190,000






Note that the Company has not reconciled Adjusted EBITDA guidance to GAAP net income (loss) because it does not provide guidance on GAAP net income (loss) or the reconciling items between Adjusted EBITDA and net income (loss) as a result of the substantial uncertainty regarding, and the potential substantial variability of, these items. The actual amount of net income (loss) and such responding reconciling items will have a significant effect on Adjusted EBITDA. Accordingly a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.






Web.com Group, Inc.
Supplemental Information
(in thousands, except for per share data)
(unaudited)
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Stock based compensation


 

 
 
 
 
    Cost of revenue
$
275

 
$
270

 
$
826

 
$
1,033

    Sales and marketing
1,137

 
1,206

 
3,768

 
3,769

    Technology and development
894

 
1,111

 
2,926

 
2,725

    General and administrative
3,392

 
2,421

 
9,838

 
7,681

Total
$
5,698

 
$
5,008

 
$
17,358

 
$
15,208



 

 
 
 
 
Revenue

 

 
 
 
 
    Subscription
$
186,758

 
$
188,771

 
$
554,616

 
$
518,084

    Professional services and other
1,809

 
1,915

 
5,800

 
5,219

Total
$
188,567

 
$
190,686

 
$
560,416

 
$
523,303



 

 
 
 
 
Other Information
 
 
 
 
 
 
 
Non-GAAP operating income
$
43,540

 
$
43,919

 
$
128,064

 
$
116,286

GAAP interest expense
$
8,567

 
$
8,270

 
$
24,603

 
$
22,530

Amortization of debt issuance costs and other
$
4,138

 
$
3,630

 
$
11,537

 
$
10,315

Income taxes paid
$
1,590

 
$
741

 
$
3,163

 
$
2,787

GAAP diluted weighted average common shares
51,013

 
50,771

 
51,093

 
50,970