Web.com Group, Inc.
May 1, 2012

Web.com Reports Record First Quarter 2012 Financial Results

JACKSONVILLE, Fla., May 1, 2012 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of internet services and online marketing solutions for small- and medium-sized businesses, today announced results for the first quarter ended March 31, 2012.

"Web.com delivered a strong performance to start 2012, with first quarter revenue and profitability exceeding the high-end of our guidance," said David Brown, Chairman and CEO of Web.com. "Our return to positive net subscriber additions is both earlier than we previously anticipated and a significant accomplishment considering that Register.com and Network Solutions were losing approximately 20,000 and 15,000 subscribers per quarter, respectively, prior to their acquisitions by Web.com. We believe that Web.com is now well positioned to benefit from a powerful combination of growing subscribers, increasing ARPU off of a much larger subscriber base, and best-in-class churn levels for a company serving the small business market."

Brown added, "We are pleased with our progress of driving cost synergies as we integrate the Network Solutions acquisition. We continue to be on plan or ahead of our expectations in this important area, which provides us with the opportunity to increase investments in sales and marketing programs focused on accelerating our long-term revenue growth. Our strategy is working, and we believe we have the opportunity to build a company with a very attractive financial profile characterized by significant scale, attractive growth, a high level of revenue visibility and best-in-class profitability and cash flow."

Summary of First Quarter 2012 Financial Results:

First Quarter and Recent Business Highlights:

Conference Call Information

Management will host a conference call today, May 1, 2012, at 5:00 p.m. (Eastern Time), to discuss Web.com's first quarter financial results and other matters related to the Company's business and forward looking guidance on selected financial metrics. A live webcast of the call will be available at the "Investor Relations" page of Web.com's website, http://ir.web.com. To access the call, dial 877-407-3982 (domestic) or 201-493-6780 (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 392565. 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- and medium-sized businesses (SMB's). Web.com meets the needs of SMBs 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/.

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. 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 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 expected growth in ARPU, expected subscriber growth, and expected strong cash flow and continued use of it to reduce Web.com's debt balance, 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," "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 Network Solutions business into Web.com, disruption created by the Network Solutions acquisition and from integration efforts 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 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, 2011, 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, 
   2012  2011 
Revenue:    
Subscription  $ 88,850  $ 38,779
Professional services and other  2,664  702
Revenue:   91,514  39,481
     
Cost of revenue (excluding depreciation and amortization):  
Subscription  37,162  17,329
Professional services and other  1,446  378
Cost of revenue:  38,608  17,707
     
Gross profit  52,906  21,774
     
Operating expenses:    
Sales and marketing  26,844  10,441
Research and development  9,707  3,549
General and administrative  14,306  6,445
Restructuring charges  912  96
Depreciation and amortization  19,679  4,821
Total operating expenses  71,448  25,352
Loss from operations  (18,542)  (3,578)
     
Other income:    
Interest expense, net  (17,776)  (1,584)
Loss before income taxes from continuing operations  (36,318)  (5,162)
Income tax benefit (expense)  6,539  (573)
Net loss from continuing operations  (29,779)  (5,735)
     
Discontinued operations:    
Gain from discontinued operations, net of tax  --   125
Income from discontinued operations, net of tax  --   125
     
Net loss  $ (29,779)  $ (5,610)
     
Basic earnings per share:    
Loss from continuing operations attributable per common share  $ (0.65)  $ (0.21)
Income from discontinued operations attributable per common share  $ --   $ -- 
Net loss per common share  $ (0.65)  $ (0.21)
     
Diluted earnings per share:    
Loss from continuing operations attributable per common share  $ (0.65)  $ (0.21)
Income from discontinued operations attributable per common share  $ --   $ -- 
Net loss per common share  $ (0.65)  $ (0.21)
     
Weighted-average number of shares used in per share amounts:    
Basic  46,140  26,618
Diluted  46,140  26,618
 
 
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands except share and per share data)
     
 March 31,
2012 
December 31, 2011 
  (unaudited)  (audited) 
     
Assets    
Current assets:    
Cash and cash equivalents  12,325  13,364
Restricted investments  300  296
Accounts receivable, net of allowance $1,534 and $1,560, respectively  15,251  13,094
Prepaid expenses  7,806  5,184
Deferred expense, current  59,031  57,302
Deferred taxes  17,579  18,563
Deferred financing fees and other current assets  5,581  4,716
Total current assets  117,873  112,519
     
Restricted investments  710  714
Property and equipment, net  26,738  25,696
Deferred expense  67,445  68,136
Goodwill  631,497  631,362
Intangible assets, net  522,287  539,979
Other assets  19,579  21,074
Total assets  $ 1,386,129  $ 1,399,480
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 8,645  $ 4,931
Accrued expenses  14,692  15,953
Accrued compensation and benefits  7,949  15,956
Accrued restructuring costs and other reserves  4,329  5,687
Deferred revenue  163,936  142,157
Current portion of debt   56,889  4,182
Other liabilities  2,779  2,496
Total current liabilities  259,219  191,362
     
Deferred revenue  150,642  132,814
Long-term debt   652,520  714,703
Deferred tax liabilities  77,024  84,832
Other long-term liabilities  3,751  4,013
Total liabilities  1,143,156  1,127,724
     
Stockholders' equity    
     
Common stock, $0.001 par value per share; 150,000,000 shares authorized; 48,620,389 and 47,359,304 shares issued and 48,608,129 and 47,359,304 shares outstanding at March 31, 2012 and December 31, 2011, respectively  49  47
Additional paid-in capital  443,117  441,955
Treasury Stock, at cost, 12,260 and 0 shares at March 31, 2012 and December 31, 2011, respectively.  (168)  -- 
Accumulated deficit  (200,025)  (170,246)
Total stockholders' equity  242,973  271,756
     
Total liabilities and stockholders' equity  $ 1,386,129  $ 1,399,480
 
 
Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands except per share data)
 (unaudited)
     
   Three Months Ended March 31, 
  2012  2011 
Reconciliation of GAAP revenue to non-GAAP revenue    
GAAP revenue  $ 91,514  $ 39,481
Fair value adjustment to deferred revenue  27,823  5,619
Non-GAAP revenue  $ 119,337  $ 45,100
     
Reconciliation of GAAP net loss to non-GAAP net income    
GAAP net loss  $ (29,779)  $ (5,610)
Amortization of intangibles  17,692  3,937
Loss (gain) on sale of assets  402  (2)
Stock based compensation  2,680  1,533
Income tax (benefit) expense  (6,539)  573
Restructuring charges  912  96
Corporate development  334  13
Amortization of deferred financing fees  3,323  308
Cash income tax expense  (285)  (174)
Fair value adjustment to deferred revenue  27,823  5,619
Fair value adjustment to deferred expense  676  93
Non-GAAP net income  $ 17,239  $ 6,386
     
Reconciliation of GAAP basic net loss per share to non-GAAP basic net income per share    
GAAP basic net loss per share  $ (0.65)  $ (0.21)
Amortization of intangibles per share  0.39  0.15
Loss (gain) on sale of assets per share   0.01  -- 
Stock based compensation per share  0.06  0.06
Income tax (benefit) expense per share  (0.14)  0.02
Restructuring charges per share  0.02  -- 
Corporate development per share  0.01  -- 
Amortization of deferred financing fees per share  0.07  0.01
Cash income tax expense per share  (0.01)  (0.01)
Fair value adjustment to deferred revenue per share  0.60  0.22
Fair value adjustment to deferred expense  0.01  -- 
Non-GAAP basic net income per share   $ 0.37  $ 0.24
     
Reconciliation of GAAP diluted net loss per share to non-GAAP net income per share    
Fully diluted shares:    
Common stock  46,140  26,618
Diluted stock options  2,279  2,569
Diluted restricted stock  1,096  1,011
Total  49,515  30,198
     
GAAP diluted net loss per share  $ (0.65)  $ (0.21)
Diluted equity per share  0.04  0.02
Amortization of intangibles per share  0.37  0.13
Loss (gain) on sale of assets per share  0.01  -- 
Stock based compensation per share  0.05  0.05
Income tax expense per share  (0.13)  0.02
Restructuring charges per share  0.02  -- 
Corporate development per share   0.01  -- 
Amortization of deferred financing fees per share  0.07  0.01
Cash income tax expense per share  (0.01)  (0.01)
Fair value adjustment to deferred revenue per share  0.56  0.20
Fair value adjustment to deferred expense per share  0.01  -- 
Non-GAAP diluted net income per share   $ 0.35  $ 0.21
     
Reconciliation of GAAP operating loss to non-GAAP operating income    
GAAP operating loss  $ (18,542)  $ (3,578)
Amortization of intangibles  17,692  3,937
Loss (gain) on sale of assets  402  (2)
Stock based compensation  2,680  1,533
Restructuring charges  912  96
Corporate development  334  13
Fair value adjustment to deferred revenue  27,823  5,619
Fair value adjustment to deferred expense  676  93
Non-GAAP operating income  $ 31,977  $ 7,711
     
Reconciliation of GAAP operating margin to non-GAAP operating margin    
GAAP operating margin -20% -9%
Amortization of intangibles 15% 9%
Loss (gain) on sale of assets 0% 0%
Restructuring charges 1% 0%
Corporate development 0% 0%
Fair value adjustment to deferred revenue 28% 14%
Fair value adjustment to deferred expense 1% 0%
Stock based compensation 2% 3%
Non-GAAP operating margin 27% 17%
     
Reconciliation of GAAP operating loss to adjusted EBITDA    
GAAP operating loss  $ (18,542)  $ (3,578)
Depreciation and amortization  19,679  4,821
Loss (gain) on sale of assets  402  (2)
Stock based compensation  2,680  1,533
Restructuring charges  912  96
Corporate development  334  13
Fair value adjustment to deferred revenue  27,823  5,619
Fair value adjustment to deferred expense  676  93
Adjusted EBITDA  $ 33,964  $ 8,595
     
Reconciliation of GAAP operating margin to adjusted EBITDA margin    
GAAP operating margin -20% -9%
Depreciation and amortization 16% 11%
Loss (gain) on sale of assets 0% 0%
Stock based compensation 2% 3%
Restructuring charges 1% 0%
Corporate development 0% 0%
Fair value adjustment to deferred revenue 28% 14%
Fair value adjustment to deferred expense 1% 0%
Adjusted EBITDA margin 28% 19%
     
   Three Months Ended March 31, 
  2012  2011 
Stock based compensation  
Subscription (cost of revenue)  $ 305  $ 188
Sales and marketing  616  283
Research and development  481  210
General and administration  1,278  852
Total  $ 2,680  $ 1,533
 
 
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
   
  Three Months Ended March 31, 
  2012  2011 
Cash flows from operating activities    
     
Net loss  $ (29,779)  $ (5,610)
     
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  19,679  4,821
Non-cash loss (gain)  402  (2)
Stock-based compensation expense  2,680  1,533
Deferred income tax (benefit) expense   (6,824)  402
Amortization of deferred financing fees and other  3,323  308
Changes in operating assets and liabilities:    
Accounts receivable, net  (2,156)  (1,402)
Prepaid expenses and other assets  (3,294)  (809)
Deferred expense  (1,039)  (931)
Accounts payable  2,958  643
Accrued expenses and other liabilities  (972)  (524)
Accrued compensation and benefits  (8,136)  (2,007)
Accrued restructuring  (1,624)  (1,026)
Deferred revenue  39,605  6,254
Net cash provided by operating activities  14,823  1,525
     
Cash flows from investing activities    
     
Proceeds from sale of discontinued operations  --   125
Purchase of property and equipment  (2,679)  (1,993)
Net cash used in investing activities  (2,679)  (1,868)
     
Cash flows from financing activities    
     
Stock issuance costs  (86)  (3)
Common stock repurchased  (3,199)  (448)
Payment of debt   (11,500)  (4,528)
Proceeds from exercise of stock options and other  1,602  6,831
Net cash (used in) provided by financing activities  (13,183)  1,852
     
Net (decrease) increase in cash and cash equivalents  (1,039)  1,509
Cash and cash equivalents, beginning of period  13,364  16,307
Cash and cash equivalents, end of period  $ 12,325  $ 17,816
     
Supplemental cash flow information:    
Interest paid  $ 14,755  $ 1,290
Income tax paid  $ 58  $ 497
CONTACT: Web.com

         Susan Datz Edelman

         Director, Investor Relations and Corporate Communications

         904-680-6909

         sedelman@web.com

         

         ICR for Web.com

         Brian Denyeau

         646-277-1251

         Brian.denyeau@icrinc.com