Web.com Group, Inc.
Feb 9, 2010

Web.com Reports Fourth Quarter and Full Year 2009 Financial Results

JACKSONVILLE, Fla., Feb. 9, 2010 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of online marketing for small and medium-sized businesses, today announced results for the fourth quarter and full year ended December 31, 2009. 

David Brown, Chairman and CEO of Web.com, said, "Web.com delivered solid financial results in 2009 considering the economic pressures impacting the small business market place. During the fourth quarter of and full year 2009, we grew our subscriber base, reduced churn to record low levels and continued to expand our distribution channels. In addition, we generated strong cash flow and shareholder value as a result of our focus on maximizing operational efficiency and successfully executing on our share repurchase program." 

Brown added, "The small business market continues to face strong economic headwinds, and visibility into a macro improvement remains limited. As a result, our focus to start 2010 is largely the same as it was entering 2009. We will continue to focus on generating strong cash flow and non-GAAP operating margins in the mid-teens range, in addition to further diversifying our partnership channel. At the same time, we plan to increase our investments in direct sales and marketing programs to further enhance the company's longer-term growth profile. Web.com again proved its resiliency during 2009, and we expect to further strengthen our long-term market position during 2010."

Summary of Fourth Quarter 2009 Results:

Other Highlights:

Summary of Full Year 2009 Financial Results:

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 February 9, 2010, at 5:00 p.m. (Eastern Time). A live webcast of the call will be available at the "Investor Relations" page of the Company's website, http://www.web.com. To access the call, dial 877-407-0784 (domestic) or 201-689-8560 (international). A replay of this conference call will be available for a limited time at 877-660-6853 (domestic) or 201-612-7415 (international). The replay account number is 3055 and the conference ID is 341738. A replay of the webcast will also be available for a limited time athttp://ir.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 and medium-sized businesses. Web.com meets the needs of small and medium-sized businesses anywhere along their lifecycle by offering a full range of online services and support, including website design, logo design, search engine optimization, search engine marketing and local sales leads, general contractor leads, franchise and homeowner association websites, shopping cart software, eCommerce web site design and call center services. 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:

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:

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 as well as expectations about the growth in markets, 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 "plan" 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, 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
December 31,
Twelve Months Ended
December 31,
  2009200820092008
  (unaudited)(unaudited)(unaudited)(audited)
Revenue:     
Subscription  $25,501 $28,032 $102,166 $117,256
Professional services  842 665 3,323 2,758
Other revenue  -- -- 1,000 100
Total revenue  26,343 28,697 106,489 120,114
      
Cost of revenue (excluding depreciation and amortization   
shown separately below):     
Subscription (a)  10,067 9,868 38,311 42,584
Professional services  577 316 2,081 1,310
Total cost of revenue  10,644 10,184 40,392 43,894
      
Gross profit  15,699 18,513 66,097 76,220
      
Operating expenses:     
Sales and marketing (a)  5,712 6,453 23,338 28,687
Research and development (a) 2,175 1,992 8,477 8,888
General and administrative (a) 4,181 4,334 19,140 19,390
Depreciation and amortization 3,132 3,431 13,295 13,408
Restructuring charges (a)  19 289 1,940 372
Goodwill and intangible asset impairment -- 102,552 -- 102,552
Total operating expenses  15,219 119,051 66,190 173,297
Income (loss) from operations  480 (100,538) (93) (97,077)
      
Other income:     
Interest, net  88 188 233 823
Income (loss) before income taxes from continuing operations 568 (100,350) 140 (96,254)
Income tax benefit (expense)  1,499 (30) 1,429 (126)
Net income (loss) from continuing operations 2,067 (100,380) 1,569 (96,380)
      
Discontinued operations:     
Income from discontinued operations -- 131 232 170
(Loss) gain on sale of discontinued operations (13) -- 808 --
(Loss) income from discontinued operations, net (13) 131 1,040 170
      
Net income (loss)  $2,054 $(100,249) $2,609 $(96,210)
      
Basic earnings per share:     
Income (loss) from continuing operations attributable per common share  $0.08 $(3.75) $0.06 $(3.52)
Income from discontinuing operations attributable per common share  $-- $0.01 $0.04 $0.01
Net income (loss) per common share  $0.08 $(3.74) $0.10 $(3.51)
      
Diluted earnings per share:     
Income (loss) from continuing operations attributable per common share  $0.07 $(3.75) $0.06 $(3.52)
Income from discontinuing operations attributable per common share  $-- $0.01 $0.04 $0.01
Net income (loss) per common share  $0.07 $(3.74) $0.10 $(3.51)
      
Weighted-average number of shares used in per share amounts:     
Basic  25,333 26,784 25,312 27,398
Diluted  27,439 26,784 26,985 27,398
      
(a) Stock based compensation included above:    
Subscription (cost of revenue) $135 $100 $450 $357
Sales and marketing  268 238 913 933
Research and development  150 119 520 441
General and administration  682 830 3,015 3,058
Restructuring charges  -- -- 1,183 --
Total  $1,235 $1,287 $6,081 $4,789
      

 

Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands except per share data)
      
    December 31, 2009December 31, 2008 
   (unaudited)(audited) 
Assets     
Current assets:     
Cash and cash equivalents   $39,427 $34,127 
Restricted investments   545 -- 
Accounts receivable, net of allowance $429 and $645, respectively 4,561 5,019 
Inventories, net of reserves of $0 and $78, respectively -- 39 
Prepaid expenses   1,780 1,430 
Prepaid marketing fees   535 665 
Deferred taxes   -- 1,093 
Other current assets   95 134 
Total current assets   46,943 42,507 
      
Restricted investments   927 316 
Property and equipment, net   7,388 8,204 
Goodwill   12,895 9,000 
Intangible assets, net   53,059 62,085 
Deferred tax asset   109 -- 
Other assets   191 383 
Total assets   $121,512 $122,495 
      
Liabilities and stockholders' equity     
Current liabilities:     
Accounts payable   $1,306 $1,406 
Accrued expenses   6,931 6,230 
Accrued restructuring costs and other reserves 1,064 2,619 
Deferred revenue   6,172 7,831 
Accrued marketing fees   259 263 
Notes payable   -- 59 
Capital lease obligations   223 -- 
Deferred tax liabilities   56 -- 
Other current liabilities   299 128 
Total current liabilities   16,310 18,536 
      
Accrued rent expense   676 535 
Deferred revenue   159 180 
Accrued restructuring costs and other reserves -- 1,214 
Capital lease obligations   198 -- 
Deferred tax liabilities   -- 2,712 
Other liabilities   473 25 
Total liabilities   17,816 23,202 
      
Stockholders' equity     
Common stock, $0.001 par value; 150,000,000 shares authorized;27,796,824 and 28,093,759 shares issued and 26,176,967 and 26,633,436 shares outstanding at December 31, 2009 and December 31, 2008, respectively. 26 27 
Additional paid-in capital   260,552 256,763 
Treasury Stock, at cost, 1,619,857 and 1,460,323 shares at December 31, 2009 and December 31, 2008, respectively. (5,477) (3,483) 
Accumulated deficit   (151,405) (154,014) 
Total stockholders' equity   103,696 99,293 
      
Total liabilities and stockholders' equity   $121,512 $122,495 
      

 

Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands except per share data)
(unaudited)
      
  Three Months Ended December 31,Twelve Months Ended December 31,
  2009200820092008
Reconciliation of GAAP net income (loss) to non-GAAP net income     
      
GAAP net income (loss)  $2,054 $(100,249) $2,609 $(96,210)
Amortization of intangibles  2,540 2,632 10,453 10,208
Goodwill and asset impairment -- 102,552 -- 102,552
Stock based compensation  1,235 1,287 4,898 4,789
Restructuring charges  19 289 1,940 372
Income tax expense  (1,499) 30 (1,429) 126
Cash income tax expense  (64) (113) (269) (270)
Fair value adjustment to deferred revenue 2 45 59 308
Loss on operating assets and liabilities (3) 44 2 44
Non-GAAP net income  $4,284 $6,517 $18,263 $21,919
      
Reconciliation of GAAP basic net income (loss) per share to non-GAAP basic net income per share     
      
Basic GAAP net income (loss) per share $0.08 $(3.74) $0.10 $(3.51)
Amortization of intangibles per share 0.10 0.10 0.41 0.37
Goodwill and asset impairment -- 3.83 -- 3.75
Stock based compensation per share 0.05 0.05 0.20 0.18
Restructuring charges per share -- -- 0.08 0.01
Income tax expense per share (0.06) -- (0.06) --
Cash income tax expense per share -- -- (0.01) (0.01)
Fair value adjustment to deferred revenue per share -- -- -- 0.01
Loss on operating assets and liabilities per share -- -- -- --
Basic Non-GAAP net income per share  $0.17 $0.24 $0.72 $0.80
      
Reconciliation of GAAP diluted net income (loss) per share to non-GAAP net income per share     
      
Fully diluted shares:     
Common stock  25,333 26,784 25,312 27,398
Diluted stock options  1,726 975 1,502 2,126
Diluted restricted stock  380 1 168 11
Warrants  -- 12 3 142
Escrow shares  -- -- -- 104
Total  27,439 27,772 26,985 29,781
      
Diluted GAAP net income (loss) per share $0.07 $(3.74) $0.10 $(3.51)
Dilutive equity and warrants per share -- 0.13 -- 0.28
Amortization of intangibles per share 0.09 0.09 0.39 0.34
Goodwill and asset impairment -- 3.69 -- 3.45
Stock based compensation per share 0.05 0.06 0.18 0.17
Restructuring charges per share -- -- 0.07 0.01
Income tax expense per share (0.05) -- (0.05) --
Cash income tax expense per share -- -- (0.01) (0.01)
Fair value adjustment to deferred revenue per share -- -- -- 0.01
Loss on operating assets and liabilities per share -- 0.00 -- --
Diluted Non-GAAP net income per share  $0.16 $0.23 $0.68 $0.74
      
Reconciliation of GAAP operating income (loss) to non-GAAP operating income     
GAAP operating income (loss)  $480 $(100,538) $(93) $(97,077)
Amortization of intangibles  2,540 2,632 10,453 10,208
Goodwill and asset impairment -- 102,552 -- 102,552
Restructuring charges  19 289 1,940 372
Fair value adjustment to deferred revenue 2 45 59 308
Stock based compensation  1,235 1,287 4,898 4,789
Non-GAAP operating income  $4,276 $6,267 $17,257 $21,152
      
Reconciliation of GAAP operating margin to non-GAAP operating margin     
GAAP operating margin  2% -350% 0% -81%
Amortization of intangibles  9% 9% 9% 9%
Goodwill and asset impairment 0% 358% 0% 86%
Restructuring charges  0% 1% 2% 0%
Fair value adjustment to deferred revenue 0% 0% 0% 0%
Stock based compensation  5% 4% 5% 4%
Non-GAAP operating margin  16% 22% 16% 18%
      
Reconciliation of GAAP operating income (loss) to adjusted EBITDA     
GAAP operating income (loss)  $480 $(100,538) $(93) $(97,077)
Goodwill and asset impairment -- 102,552 -- 102,552
Depreciation and amortization 3,132 3,431 13,295 13,408
Restructuring charges  19 289 1,940 372
Stock based compensation  1,235 1,287 4,898 4,789
Adjusted EBITDA  $4,866 $7,021 $20,040 $24,044

 

Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands)
    
    
  Twelve Months Ended December 31,
  20092008
  (unaudited)(audited)
Cash flows from operating activities  
    
Net income (loss)  $2,609 $(96,210)
    
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Gain on sale of discontinued operations  (808) --
Depreciation and amortization  13,295 13,408
Goodwill and asset impairment  -- 102,552
Loss on operating assets and liabilities  2 44
Stock-based compensation expense  4,898 4,789
Restructuring charges  1,940 372
Deferred income tax  (1,672) (9)
Changes in operating assets and liabilities:   
Accounts receivable  1,065 1,275
Inventories  39 (13)
Prepaid expenses and other assets  34 3,270
Accounts payable, accrued expenses and other liabilities  (3,955) (13,472)
Deferred revenue  (1,995) (1,034)
Net cash provided by operating activities  15,452 14,972
    
Cash flows from investing activities   
    
Business acquisition, net of cash received (3,740) (4,573)
Proceeds from sale of investment  -- 8,500
Gain from sale of discontinued operations  808 --
Purchase of investment  -- (3,491)
Change in restricted investments (1,156) 1,194
Purchase of property and equipment  (1,131) (4,321)
Investment in intangible assets  (5) (995)
Net cash (used in) investing activities  (5,224) (3,686)
    
Cash flows from financing activities   
    
Stock issuance costs  (19) (23)
Common stock repurchased  (4,698) (6,866)
Stock options repurchased  (979) --
Payment of debt obligations  (642) (1,187)
Proceeds from exercise of stock options  1,410 1,171
Net cash (used in) financing activities  (4,928) (6,905)
    
Net increase in cash and cash equivalents  5,300 4,381
Cash and cash equivalents, beginning of period  34,127 29,746
Cash and cash equivalents, end of period  $39,427 $34,127
    
Supplemental cash flow information:  
Interest paid  $47 $26
Income tax paid  $296 $146
CONTACT:  ICR
          Kori Doherty
          617-956-6730
          kori.doherty@icrinc.com

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