Web.com Group, Inc.
Aug 3, 2010

Web.com Reports Second Quarter 2010 Financial Results

JACKSONVILLE, Fla., Aug. 3, 2010 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of online marketing for small businesses, today announced results for the second quarter ended June 30, 2010. 

"Web.com delivered second quarter revenue and profitability that were consistent with our expectations," said David Brown, Chairman and CEO of Web.com. "While the macro environment facing small businesses remains challenging, we are excited about Web.com's future as the acquisition of Register.com is a transformational event for our company. We have expanded our customer base to over 1 million subscribers, broadened our value proposition with highly synergistic offerings and increased our non-GAAP revenue run rate by approximately 80%."

Brown added, "We believe the addition of Register.com will not only have a significant positive impact on our already strong adjusted EBITDA, it will also provide far greater resources to invest in sales and marketing programs that we are optimistic will restore top line growth off of a much larger revenue base. We believe our combined resources and value proposition enhances Web.com's leadership position and ability to capitalize on the large market opportunity related to online marketing solutions for small and medium-sized businesses."

Second Quarter and Recent Business Highlights:

Summary of Second Quarter 2010 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 additional details on the acquisition of Register.com and guidance related to future results, today August 3, 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 353440. A replay of the webcast will also be available for a limited time at http://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, corporate development expenses, the deferred revenue adjustment due to purchase accounting, income tax expense, and includes an estimated cash tax rate to be paid during 2010. Non-GAAP operating income excludes stock-based compensation expense, amortization expense related to acquisitions, restructuring charges, corporate development expenses 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 meets the needs of small businesses anywhere along their lifecycle by offering a full range of online services and support, including domain name registration services, 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, 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:

Forward-Looking Statements

This press release includes certain "forward-looking statements" including, without limitation, statements regarding the anticipated reach, capabilities and opportunities for the combined company following the Register.com acquisition, expected benefits to merchants and other customers, market opportunities, and expected customer base, 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," "potential," "will," "expect," "opportunities," 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 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, Web.com's ability to integrate the Web.com and Register.com businesses, disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks related to the successful offering of the combined company's products and services; the risk that the anticipated benefits of the acquisition may not be realized; and other risks that may impact Web.com's and Register.com's businesses.  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 March 31, 2010, 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 June 30,  Six Months Ended June 30, 
  2010  2009  2010  2009 
   (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenue:    
Subscription $ 23,957 $ 25,438 $ 48,438 $ 51,456
Professional services 820 1,037 1,468 1,590
Other revenue --  --  --  1,000
Total revenue 24,777 26,475 49,906 54,046
     
Cost of revenue (excluding depreciation and amortization
shown separately below):
    
Subscription 9,652 9,413 19,686 18,721
Professional services 485 575 963 876
Total cost of revenue 10,137 9,988 20,649 19,597
     
Gross profit 14,640 16,487 29,257 34,449
     
Operating expenses:    
Sales and marketing 5,185 5,881 10,731 11,645
Research and development 2,225 2,086 4,496 4,128
General and administrative 5,572 4,789 9,347 10,851
Depreciation and amortization 3,313 3,441 6,593 6,790
Restructuring charges (6) --  54 -- 
Total operating expenses 16,289 16,197 31,221 33,414
(Loss) income from operations (1,649) 290 (1,964) 1,035
     
Other income:    
Interest income, net 58 43 98 105
(Loss) income before income taxes from continuing operations (1,591) 333 (1,866) 1,140
Income tax expense (217) (26) (687) (43)
Net (loss) income from continuing operations (1,808) 307 (2,553) 1,097
     
Discontinued operations:    
Income (loss) from discontinued operations, net of tax --  95 (9) 228
Gain on sale of discontinued operations, net of tax 125 822 125 822
Income from discontinued operations, net of tax 125 917 116 1,050
     
Net (loss) income  $ (1,683) $ 1,224 $ (2,437) $ 2,147
     
Basic earnings per share:    
(Loss) income from continuing operations
attributable per common share
 $ (0.07) $ 0.01 $ (0.10) $ 0.04
Income from discontinuing operations attributable
per common share
 $ --  $ 0.04 $ --  $ 0.04
Net (loss) income per common share $ (0.07) $ 0.05 $ (0.10) $ 0.08
     
Diluted earnings per share:    
(Loss) income from continuing operations
attributable per common share
 $ (0.07) $ 0.01 $ (0.10) $ 0.04
Income from discontinuing operations attributable
per common share
 $ --  $ 0.04 $ --  $ 0.04
Net (loss) income per common share $ (0.07) $ 0.05 $ (0.10) $ 0.08
     
Weighted-average number of shares used in per
share amounts:
    
Basic 25,457 25,130 25,433 25,365
Diluted 25,457 26,903 25,433 26,603
     
     
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands except per share data)
      
    June 30, 2010  December 31, 2009 
    (unaudited)  (audited) 
Assets    
Current assets:    
Cash and cash equivalents   $ 42,809 $ 39,427
Restricted investments   546 545
Accounts receivable, net of allowance $344 and $428, respectively   3,435 4,561
Prepaid expenses   1,490 1,780
Prepaid marketing fees   487 535
Deferred taxes   961 1,482
Other current assets   90 95
Total current assets   49,818 48,425
     
Restricted investments   928 927
Property and equipment, net   6,895 7,388
Goodwill   12,881 12,895
Intangible assets, net   49,262 53,059
Other assets   110 191
Total assets   $ 119,894 $ 122,885
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable   $ 1,182 $ 1,306
Accrued expenses   5,714 6,931
Accrued restructuring costs and other reserves   271 1,064
Deferred revenue   5,762 6,172
Accrued marketing fees   243 259
Capital lease obligations   160 223
Other current liabilities   192 299
Total current liabilities   13,524 16,254
     
Accrued rent expense   758 676
Deferred revenue   139 159
Capital lease obligations   133 198
Deferred tax liabilities   1,429 1,429
Other liabilities   408 473
Total liabilities   16,391 19,189
     
     
Stockholders' equity    
Common stock, $0.001 par value; 150,000,000 shares authorized; 27,758,690 and 27,796,824 shares issued and 26,621,105 and 26,176,967 shares outstanding at June 30, 2010 and December 31, 2009, respectively.  27 26
Additional paid-in capital   261,557 260,552
Treasury Stock, at cost, 1,137,585 and 1,619,857 shares at June 30, 2010 and December 31, 2009, respectively.  (4,239) (5,477)
Accumulated deficit   (153,842) (151,405)
Total stockholders' equity   103,503 103,696
     
Total liabilities and stockholders' equity   $ 119,894 $ 122,885
     
     
Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands except per share data)
 (unaudited)
     
  Three Months Ended June 30,  Six Months Ended June 30, 
  2010  2009  2010  2009 
Reconciliation of GAAP net (loss) income to
non-GAAP net income
    
GAAP net (loss) income  $ (1,683) $ 1,224 $ (2,437) $ 2,147
Amortization of intangibles 2,664 2,687 5,283 5,301
Stock based compensation 1,200 1,196 2,205 2,519
Income tax expense 217 26 687 43
Restructuring charges (6) --  54 -- 
Corporate development 909 --  909 -- 
Cash income tax expense (44) (91) (109) (183)
Fair value adjustment to deferred revenue 5 17 16 50
Non-GAAP net income $ 3,262 $ 5,059 $ 6,608 $ 9,877
     
Reconciliation of GAAP basic net (loss) income
per share to non-GAAP basic net income per share
    
Basic GAAP net (loss) income per share $ (0.07) $ 0.05 $ (0.10) $ 0.08
Amortization of intangibles per share 0.10 0.11 0.20 0.21
Stock based compensation per share 0.05 0.04 0.09 0.11
Income tax expense per share 0.01 --  0.03 -- 
Restructuring charges per share --  --  --  -- 
Corporate development per share 0.04 --  0.04 -- 
Cash income tax expense per share --  --  --  (0.01)
Fair value adjustment to deferred revenue per share --  --  --  -- 
Basic Non-GAAP net income per share  $ 0.13 $ 0.20 $ 0.26 $ 0.39
     
Reconciliation of GAAP diluted net (loss) income
per share to non-GAAP net income per share
    
Fully diluted shares:    
Common stock 25,457 25,130 25,433 25,365
Diluted stock options 1,091 1,450 1,259 1,190
Diluted restricted stock 258 321 316 45
Warrants --  2 --  3
Total 26,806 26,903 27,008 26,603
     
Diluted GAAP net (loss) income per share $ (0.07) $ 0.05 $ (0.10) $ 0.08
Amortization of intangibles per share 0.10 0.10 0.20 0.20
Stock based compensation per share 0.04 0.04 0.08 0.10
Income tax expense per share 0.01 --  0.03 -- 
Restructuring charges per share --  --  --  -- 
Corporate development 0.04 --  0.03 -- 
Cash income tax expense per share --  --  --  (0.01)
Fair value adjustment to deferred revenue per share --  --  --  -- 
Diluted Non-GAAP net income per share  $ 0.12 $ 0.19 $ 0.24 $ 0.37
     
Reconciliation of GAAP operating (loss) income to
non-GAAP operating income
    
GAAP operating (loss) income $ (1,649) $ 290 $ (1,964) $ 1,035
Amortization of intangibles 2,664 2,687 5,283 5,301
Stock based compensation 1,200 1,196 2,205 2,519
Restructuring charges (6) --  54 -- 
Corporate development 909 --  909 -- 
Fair value adjustment to deferred revenue 5 17 16 50
Non-GAAP operating income $ 3,123 $ 4,190 $ 6,503 $ 8,905
     
Reconciliation of GAAP operating margin to non-GAAP
operating margin
    
GAAP operating margin -7% 1% -4% 2%
Amortization of intangibles 11% 10% 11% 10%
Restructuring charges 0% 0% 0% 0%
Corporate development 4% 0% 2% 0%
Fair value adjustment to deferred revenue 0% 0% 0% 0%
Stock based compensation 5% 5% 4% 4%
Non-GAAP operating margin 13% 16% 13% 16%
     
Reconciliation of GAAP operating (loss) income
to adjusted EBITDA
    
GAAP operating (loss) income $ (1,649) $ 290 $ (1,964) $ 1,035
Depreciation and amortization 3,313 3,441 6,593 6,790
Stock based compensation 1,200 1,196 2,205 2,519
Restructuring charges (6) --  54 -- 
Corporate development 909 --  909 -- 
Adjusted EBITDA $ 3,767 $ 4,927 $ 7,797 $ 10,344
     
     
     
Web.com Group, Inc.  
Consolidated Statement of Cash Flows  
(in thousands)  
     
     
   Six Months Ended June 30, 
   2010  2009 
  (unaudited)(unaudited)
Cash flows from operating activities   
    
Net (loss) income   $ (2,437) $ 2,147
    
    
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
   
Gain on sale of discontinued operations, net of tax  (125) (822)
Depreciation and amortization  6,593 6,790
Stock-based compensation expense  2,205 2,519
Deferred income taxes  521 36
Restructuring charges  54 -- 
Changes in operating assets and liabilities:   
 Accounts receivable  1,121 565
 Prepaid expenses and other assets  425 (259)
 Accounts payable, accrued expenses and other liabilities  (2,326) (1,976)
 Deferred revenue   (511) (900)
Net cash provided by operating activities  5,520 8,100
    
Cash flows from investing activities   
    
Business acquisitions  --  (3,490)
Proceeds from gain on sale of discontinued operations  125 822
Net change in restricted cash  (1) -- 
Purchase of property and equipment  (777) (510)
Investment in intangible assets  (1,396) (3)
Net cash used in investing activities  (2,049) (3,181)
    
Cash flows from financing activities   
    
Stock issuance costs  (7) (8)
Stock repurchased  (53) (3,534)
Payment of debt obligations  (128) (165)
Proceeds from exercise of stock options  99 215
Net cash used in financing activities  (89) (3,492)
    
Net increase in cash and cash equivalents  3,382 1,427
Cash and cash equivalents, beginning of period  39,427 34,127
Cash and cash equivalents, end of period  $ 42,809 $ 35,554
    
Supplemental cash flow information:   
 Interest paid  $ 18 $ 13
 Income tax paid  $ 98 $ 226
CONTACT: ICR
         Kori Doherty
         617-956-6730
         kori.doherty@icrinc.com

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.