Web.com Group, Inc.
May 3, 2011

Web.com Reports First Quarter 2011 Financial Results

Non-GAAP revenue exceeds high-end of guidance
Non-GAAP net income per diluted share is consistent with guidance
ARPU growth and record low customer churn levels continue in 1Q
New offerings for Facebook and Mobile receiving high levels of customer interest

JACKSONVILLE, Fla., May 3, 2011 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of internet services and online marketing solutions for small businesses, today announced results for the first quarter ended March 31, 2011.

"The first quarter was an encouraging start to 2011 and our financial results were consistent with or above our expectations," said David Brown, Chairman and CEO of Web.com. "While the economic environment remains challenging, small businesses are increasingly looking to leverage the growing adoption of online local search, social media and mobile devices. We believe Web.com is well positioned to benefit from this trend due to the combination of our new Facebook and Mobile offerings along with our core web services and online marketing solutions."

"We have recently initiated plans to further increase investments in our direct response television advertising and "Feet on the Street" lead generation initiatives based on positive returns from our marketing tests," Brown added. "We believe the combination of increasing revenue growth and incremental cost synergies will enable Web.com to deliver approximately $1.00 per share in non-GAAP EPS for 2011, even after absorbing stepped up marketing expenses and higher than expected diluted shares outstanding following appreciation in Web.com's share price. We believe our increased investments will further strengthen Web.com's ability to emerge from the economic downturn with a combination of scale, accelerating growth, and strong profitability and cash flow."

Summary of First Quarter 2011 Financial Results:

First Quarter and Recent Business Highlights:

Conference Call Information

Management will host a conference call to discuss Web.com's results and other matters related to the Company's business and guidance related to future results, today May 3, 2011, 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://ir.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 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 370541. A replay of the webcast will also be available for a limited time at http://ir.web.com.

About Web.com

Web.com Group, Inc. (Nasdaq:WWWW) is a leading provider of internet services and online marketing solutions 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 measures 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 expected growth from our investment in marketing initiatives, cost synergies resulting from our recent combination with Register.com, 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 Annual Report on Form 10-K for the year ended December 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)
(unaudited)
     
  Three Months Ended March 31, 
  2011  2010 
     
Revenue:    
Subscription  $ 38,779  $ 24,480
Professional services  702  648
Total revenue  39,481  25,128
     
Cost of revenue (excluding depreciation and amortization shown     
separately below):    
Subscription  17,329  10,034
Professional services  378  478
Total cost of revenue  17,707  10,512
     
Gross profit  21,774  14,616
     
Operating expenses:    
Sales and marketing  10,441  5,546
Research and development  3,549  2,271
General and administrative  6,445  3,775
Restructuring charges  96  60
Depreciation and amortization  4,821  3,279
Total operating expenses  25,352  14,931
Loss from operations  (3,578)  (315)
     
Other income:    
Interest (expense) income, net  (1,584)  41
Loss before income taxes from continuing operations  (5,162)  (274)
Income tax expense  (573)  (471)
Net loss from continuing operations  (5,735)  (745)
     
Discontinued operations:    
Gain (loss) from discontinued operations, net of tax  125  (9)
Income (loss) from discontinued operations, net of tax  125  (9)
     
Net loss  $ (5,610)  $ (754)
     
Basic earnings per share:    
Loss from continuing operations attributable per common share  $ (0.21)  $ (0.03)
Income from discontinued operations attributable per common share  $ --   $ -- 
Net loss per common share  $ (0.21)  $ (0.03)
     
Diluted earnings per share:    
(Loss) income from continuing operations attributable per common share  $ (0.21)  $ (0.03)
Income from discontinued operations attributable per common share  $ --   $ -- 
Net loss per common share  $ (0.21)  $ (0.03)
     
Weighted-average number of shares used in per share amounts:    
Basic  26,618  25,410
Diluted  26,618  25,410
     
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands except per share data)
     
     
  March 31, 2011  December 31,
2010 
  (unaudited)  (audited) 
Assets    
Current assets:    
Cash and cash equivalents  $ 17,816  $ 16,307
Restricted investments  301  300
Accounts receivable, net of allowance $680 and $523, respectively  9,614  8,100
Prepaid expenses  3,388  2,551
Prepaid registry fees  14,434  14,193
Deferred taxes  233  248
Deferred financing fees and other current assets  1,330  1,221
Total current assets  47,116  42,920
     
Restricted investments  1,110  1,110
Property and equipment, net  9,087  8,765
Prepaid registry fees  14,259  13,569
Goodwill  122,727  122,512
Intangible assets, net  102,905  106,843
Other assets  3,327  3,770
Total assets  $ 300,531  $ 299,489
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 3,181  $ 3,276
Accrued expenses  4,617  5,276
Accrued compensation and benefits  4,818  6,799
Accrued restructuring costs and other reserves  1,299  2,325
Deferred revenue  40,557  36,664
Current portion of debt   10,074  9,533
Other liabilities  1,215  1,180
Total current liabilities  65,761  65,053
     
Accrued rent expense  1,136  914
Deferred revenue  27,498  25,149
Long-term debt   88,553  93,623
Deferred tax liabilites  10,497  10,005
Other long-term liabilities  1,150  1,138
Total liabilities  194,595  195,882
     
     
Stockholders' equity    
Common stock, $0.001 par value per share; 150,000,000 shares authorized; 28,955,566
and 27,756,227 shares issued and 28,955,566 and 27,340,062 shares outstanding at March 31, 2011
and December 31, 2010, respectively
 29  27
Additional paid-in capital  269,469  263,453
Treasury Stock, at cost, 0 and 416,165 shares at March 31, 2011 and December 31, 2010, respectively.  --   (1,896)
Accumulated other comprehensive loss, net of income tax benefit  (15)  (40)
Accumulated deficit  (163,547)  (157,937)
Total stockholders' equity  105,936  103,607
     
Total liabilities and stockholders' equity  $ 300,531  $ 299,489
     
Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands except per share data)
 (unaudited)
     
  Three Months Ended March 31, 
  2011  2010 
Reconciliation of GAAP revenue to non-GAAP revenue    
GAAP revenue  $ 39,481  $ 25,128
Fair value adjustment to deferred revenue  5,619  10
Non-GAAP revenue  $ 45,100  $ 25,138
     
Reconciliation of GAAP net loss to non-GAAP net income    
GAAP net loss  $ (5,610)  $ (754)
Amortization of intangibles  3,937  2,618
Gain on sale of assets  (2)  -- 
Stock based compensation  1,533  1,006
Income tax expense  573  471
Restructuring charges  96  60
Corporate development  13  -- 
Amortization of deferred financing fees  308  -- 
Cash income tax expense  (174)  (65)
Fair value adjustment to deferred revenue  5,619  10
Fair value adjustment to prepaid registry fees  93  -- 
Non-GAAP net income  $ 6,386  $ 3,346
     
Reconciliation of GAAP basic net loss per share to non-GAAP basic net income per share    
Basic GAAP net loss per share  $ (0.21)  $ (0.03)
Amortization of intangibles per share  0.15  0.10
Gain on sale of assets per share   --   -- 
Stock based compensation per share  0.06  0.04
Income tax expense per share  0.02  0.02
Restructuring charges per share  --   -- 
Corporate development per share  --   -- 
Amortization of deferred financing fees per share  0.01  -- 
Cash income tax expense per share  (0.01)  -- 
Fair value adjustment to deferred revenue per share  0.22  -- 
Fair value adjustment to prepaid registry fees  --   -- 
Basic Non-GAAP net income per share   $ 0.24  $ 0.13
     
Reconciliation of GAAP diluted net loss per share to non-GAAP net income per share    
Fully diluted shares:    
Common stock  26,618  25,410
Diluted stock options  2,569  1,398
Diluted restricted stock  1,011  359
Total  30,198  27,167
     
Diluted GAAP net loss per share  $ (0.21)  $ (0.03)
Diluted equity per share  0.02  -- 
Amortization of intangibles per share  0.13  0.09
Gain on sale of assets per share  --   -- 
Stock based compensation per share  0.05  0.04
Income tax expense per share  0.02  0.02
Restructuring charges per share  --   -- 
Corporate development per share   --   -- 
Amortization of deferred financing fees per share  0.01  -- 
Cash income tax expense per share  (0.01)  -- 
Fair value adjustment to deferred revenue per share  0.20  -- 
Fair value adjustment to prepaid registry fees per share  --   -- 
Diluted Non-GAAP net income per share   $ 0.21  $ 0.12
     
Reconciliation of GAAP operating loss to non-GAAP operating income    
GAAP operating loss  $ (3,578)  $ (315)
Amortization of intangibles  3,937  2,618
Stock based compensation  1,533  1,006
Restructuring charges  96  60
Corporate development  13  -- 
Fair value adjustment to deferred revenue  5,619  10
Fair value adjustment to prepaid registry fees  93  -- 
Non-GAAP operating income  $ 7,713  $ 3,379
     
Reconciliation of GAAP operating margin to non-GAAP operating margin    
GAAP operating margin -9% -1%
Amortization of intangibles 9% 10%
Restructuring charges 0% 0%
Corporate development 0% 0%
Fair value adjustment to deferred revenue 14% 0%
Fair value adjustment to prepaid registry fees 0% 0%
Stock based compensation 3% 4%
Non-GAAP operating margin 17% 13%
     
Reconciliation of GAAP operating loss to adjusted EBITDA    
GAAP operating loss  $ (3,578)  $ (315)
Depreciation and amortization  4,821  3,279
Stock based compensation  1,533  1,006
Restructuring charges  96  60
Corporate development  13  -- 
Fair value adjustment to deferred revenue  5,619  10
Fair value adjustment to prepaid registry fees  93  -- 
Adjusted EBITDA  $ 8,597  $ 4,040
     
Reconciliation of GAAP operating margin to adjusted EBITDA margin    
GAAP operating margin -9% -1%
Depreciation and amortization 11% 13%
Stock based compensation 3% 4%
Restructuring charges 0% 0%
Corporate development 0% 0%
Fair value adjustment to deferred revenue 14% 0%
Fair value adjustment to prepaid registry fees 0% 0%
Adjusted EBITDA margin 19% 16%
     
  Three Months Ended March 31, 
  2011  2010 
Stock based compensation    
Subscription (cost of revenue)  $ 188  $ 132
Sales and marketing  283  153
Research and development  210  144
General and administration  852  577
Total  $ 1,533  $ 1,006
     
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
     
  Three Months Ended March 31, 
  2011  2010 
   
Cash flows from operating activities    
     
Net loss  $ (5,610)  $ (754)
     
Adjustments to reconcile net loss to net cash provided by operating activities:    
Gain on sale of discontinued operations, net of tax  (125)  -- 
Depreciation and amortization  4,821  3,279
Stock-based compensation expense  1,533  1,006
Deferred income tax benefit  402  398
Other non cash expenses  306  -- 
Changes in operating assets and liabilities:    
Accounts receivable, net  (1,402)  800
Prepaid expenses and other assets  (809)  75
Prepaid registry fees  (931)  -- 
Accounts payable  643  481
Accrued expenses and other liabilities  (524)  (354)
Accrued compensation and benefits  (2,007)  (2,521)
Accrued restructuring  (1,026)  (440)
Deferred revenue  6,254  (121)
Net cash provided by operating activities  1,525  1,849
     
Cash flows from investing activities    
     
Proceeds from sale of discontinued operations  125  -- 
Investment in intangible assets  --   (1,396)
Purchase of property and equipment  (1,993)  (384)
Net cash used in investing activities  (1,868)  (1,780)
     
Cash flows from financing activities    
     
Stock issuance costs  (3)  (3)
Common Stock repurchased  (448)  (53)
Payment of debt obligations  (4,528)  (66)
Proceeds from exercise of stock options and other  6,831  76
Net cash provided by (used in) financing activities  1,852  (46)
     
Net increase in cash and cash equivalents  1,509  23
Cash and cash equivalents, beginning of period  16,307  39,427
Cash and cash equivalents, end of period  $ 17,816  $ 39,450
     
Supplemental cash flow information:    
 Interest paid  $ 1,290  $ 9
 Income tax paid  $ 497  $ 64
     
CONTACT: Web.com

         Susan Datz Edelman

         Director, Investor Relations and Corporate Communications

         904-680-6909

         sedelman@web.com

         

         ICR for Web.com

         Kori Doherty

         617-956-6730

         Kori.doherty@icrinc.com