Web.com Group, Inc.
Feb 7, 2013

Web.com Reports Record Fourth Quarter and Full Year 2012 Financial Results

JACKSONVILLE, Fla., Feb. 7, 2013 (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 fourth quarter and full year ended December 31, 2012.

"2012 was a pivotal year for Web.com as our successful integration of Network Solutions has created a company with an annualized non-GAAP revenue run rate of more than $500 million, an accelerating revenue growth profile, and best-in-class profitability margins and strong cash flow from operations," said David Brown, chairman and chief executive officer of Web.com.

The Company achieved a significant milestone by exceeding three million subscribers at year end. Web.com's pro forma revenue growth rate accelerated from the low single digits in 2011 to 7.2% in 2012. Also during the fourth quarter, Web.com refinanced its debt to more attractive rates and further reduced its debt balance ahead of the prescribed schedule.

Mr. Brown added, "Our strategy of using our domain name business as a lead generation source and cross-sell opportunity for our broad suite of online marketing solutions is working. We believe we are well-positioned to continue delivering consistent net subscriber growth, improving ARPU gains with new products and services, and best in class churn rates to meet our longer-term target of low-teens revenue growth, consistently high profitability margins and even faster growth in earnings through continued deleveraging."

Summary of Fourth Quarter 2012 Financial Results:

Fourth Quarter and Recent Business Highlights:

Summary of Full Year 2012 Financial Results:

Conference Call Information

Management will host a conference call today February 7, 2013, at 5:00 p.m. (Eastern Time), to discuss Web.com's fourth quarter and full year 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 407334.  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 (SMBs). 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, website design, search engine optimization, internet marketing and local sales leads, social media and mobile solutions, shopping cart software, eCommerce website 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 improving ARPU gains with new products and services, expected low teens revenue growth, the success of our strategy, our ability to continue to deliver consistent net subscriber growth and high profitability margins, and our ability to deliver faster growth in earnings through continued deleveraging, 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," 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, 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 December 31,  Twelve Months Ended December 31, 
  2012  2011  2012  2011 
         
Revenue:        
Subscription  $ 109,236  $ 72,003  $ 396,687  $ 195,645
Professional services and other  2,197  1,577  10,959  3,560
Total revenue  111,433  73,580  407,646  199,205
         
Cost of revenue (excluding depreciation and amortization shown separately below):        
Subscription  40,221  31,764  153,417  83,406
Professional services and other  1,507  353  6,913  1,415
Total cost of revenue  41,728  32,117  160,330  84,821
         
Gross profit  69,705  41,463  247,316  114,384
         
Operating expenses:        
Sales and marketing  31,035  19,553  117,811  51,743
Research and development  8,209  9,050  34,258  19,252
General and administrative  11,368  21,256  49,807  45,164
Restructuring  (55)  9,206  2,469  9,536
Depreciation and amortization  19,753  15,243  78,981  29,456
Total operating expenses  70,310  74,308  283,326  155,151
Loss from operations  (605)  (32,845)  (36,010)  (40,767)
         
Other (expense) income:        
Interest expense, net  (14,003)  (17,227)  (66,124)  (21,826)
Loss on debt extinguishment  (41,977)  --   (41,977)  -- 
Gain on sale of equity method investment  --   --   5,156  -- 
Loss before income taxes from continuing operations  (56,585)  (50,072)  (138,955)  (62,593)
Income tax benefit  4,707  50,741  16,738  50,084
Net (loss) income from continuing operations  (51,878)  669  (122,217)  (12,509)
         
Discontinued operations:        
(Loss) gain from discontinued operations, net of tax  --   (125)  --   200
(Loss) gain from discontinued operations, net of tax  --   (125)  --   200
         
Net (loss) income  $ (51,878)  $ 544  $ (122,217)  $ (12,309)
         
Basic earnings per share:        
(Loss) income from continuing operations attributable per common share  $ (1.10)  $ 0.02  $ (2.61)  $ (0.41)
(Loss) Income from discontinued operations attributable per common share  $ --   $ (0.01)  $ --   $ 0.01
Net (loss) income per common share  $ (1.10)  $ 0.01  $ (2.61)  $ (0.40)
         
Diluted earnings per share:        
(Loss) income from continuing operations attributable per common share  $ (1.10)  $ 0.02  $ (2.61)  $ (0.41)
(Loss) income from discontinued operations attributable per common share  $ --   $ (0.01)  $ --   $ 0.01
Net (loss) income per common share  $ (1.10)  $ 0.01  $ (2.61)  $ (0.40)
         
Weighted-average number of shares used in per share amounts:        
Basic  47,068  40,667  46,892  30,675
Diluted  47,068  43,279  46,892  30,675
 
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands except per share data)
     
     
  December 31, 2012  December 31, 2011 
  (unaudited)  (audited) 
Assets    
Current assets:    
Cash and cash equivalents  $ 15,181  $ 13,364
Restricted investments  601  296
Accounts receivable, net of allowance $2,337 and $1,560, respectively  15,007  13,094
Prepaid expenses  6,697  5,184
Deferred expenses  59,255  57,302
Deferred taxes  18,092  18,563
Deferred financing fees and other  4,515  4,716
Total current assets  119,348  112,519
     
Restricted investments  710  714
Property and equipment, net  40,079  25,696
Deferred expenses  63,147  68,136
Goodwill  628,176  631,362
Intangible assets, net  469,703  539,979
Other assets  6,107  21,074
Total assets  $ 1,327,270  $ 1,399,480
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 6,385  $ 4,931
Accrued expenses  11,562  15,953
Accrued compensation and benefits  15,413  15,956
Accrued restructuring  1,477  5,687
Deferred revenue  191,149  142,157
Current portion of debt  4,681  4,182
Other liabilities  2,556  2,496
Total current liabilities  233,223  191,362
     
Deferred revenue  175,816  132,814
Long-term debt   688,140  714,703
Deferred tax liabilites  64,126  84,832
Other long-term liabilities  4,352  4,013
Total liabilities  1,165,657  1,127,724
     
     
Stockholders' equity    
Common stock, $0.001 par value per share; 150,000,000 shares authorized; 49,175,642 and 47,359,304 shares issued and outstanding at December 31, 2012 and 2011, respectively  49  47
Additional paid-in capital  454,022  441,955
Accumulated other comprehensive income  5  -- 
Accumulated deficit  (292,463)  (170,246)
Total stockholders' equity  161,613  271,756
     
Total liabilities and stockholders' equity  $ 1,327,270  $ 1,399,480
 
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, 
  2012  2011  2012  2011 
Reconciliation of GAAP revenue to non-GAAP revenue        
GAAP revenue  $ 111,433  $ 73,580  $ 407,646  $ 199,205
Fair value adjustment to deferred revenue  14,719  22,911  83,732  35,238
Non-GAAP revenue  $ 126,152  $ 96,491  $ 491,378  $ 234,443
         
Reconciliation of GAAP net (loss) income to non-GAAP net income        
GAAP net (loss) income  $ (51,878)  $ 544  $ (122,217)  $ (12,309)
Amortization of intangibles  17,397  13,703  70,350  25,389
Loss on sale of assets  1  --   403  10
Stock based compensation  3,077  1,948  11,927  6,933
Income tax benefit  (4,707)  (50,616)  (16,738)  (49,958)
Restructuring (credits) charges  (55)  9,206  2,469  9,536
Corporate development  --   7,789  660  13,083
Amortization of deferred financing fees  1,648  5,918  11,017  6,856
Cash income tax (expense) benefit  (11)  259  (1,044)  (214)
Fair value adjustment to deferred revenue  14,719  22,911  83,732  35,238
Fair value adjustment to deferred expense  495  538  2,376  739
Loss on debt extinguishment  41,977  --   41,977  -- 
Gain on sale of equity method investment  --  --   (5,156)  -- 
Non-GAAP net income  $ 22,663  $ 12,200  $ 79,756  $ 35,303
         
Reconciliation of GAAP basic net (loss) income per share to non-GAAP basic net income per share        
Basic GAAP net (loss) income  $ (1.10)  $ 0.01  $ (2.61)  $ (0.40)
Amortization of intangibles   0.36  0.33  1.50  0.83
Loss on sale of assets  --   --   0.01  -- 
Stock based compensation   0.07  0.05  0.25  0.23
Income tax benefit  (0.10)  (1.24)  (0.36)  (1.63)
Restructuring charges   --   0.23  0.05  0.31
Corporate development   --   0.19  0.01  0.43
Amortization of deferred financing fees  0.04  0.15  0.23  0.22
Cash income tax expense   --   0.01  (0.02)  (0.01)
Fair value adjustment to deferred revenue   0.31  0.56  1.79  1.15
Fair value adjustment to deferred expense  0.01  0.01  0.05  0.02
Loss on debt extinguishment  0.89  --   0.90  -- 
Gain on sale of equity method investment  --   --   (0.10)  -- 
Basic Non-GAAP net income per share   $ 0.48  $ 0.30  $ 1.70  $ 1.15
         
Reconciliation of GAAP diluted net (loss) income per share to non-GAAP diluted net income per share        
Fully diluted shares:        
Common stock  47,068  40,667  46,892  30,675
Diluted stock options  1,968  1,630  2,186  2,058
Diluted restricted stock  964  982  1,117  1,006
Total  50,000  43,279  50,195  33,739
         
Diluted GAAP net (loss) income per share  $ (1.10)  $ 0.01  $ (2.61)  $ (0.40)
Diluted equity  0.06  --   0.17  0.04
Amortization of intangibles   0.34  0.32  1.40  0.76
Loss on sale of assets  --   --   0.01  -- 
Stock based compensation  0.06  0.05  0.24  0.21
Income tax benefit   (0.09)  (1.17)  (0.33)  (1.48)
Restructuring charges  --   0.21  0.05  0.28
Corporate development   --   0.18  0.01  0.39
Amortization of deferred financing fees   0.03  0.13  0.22  0.20
Cash income tax expense (benefit)  --   0.01  (0.02)  (0.01)
Fair value adjustment to deferred revenue   0.29  0.53  1.67  1.04
Fair value adjustment to deferred expense   0.01  0.01  0.05  0.02
Loss on debt extinguishment  0.85  --   0.84  -- 
Gain on sale of equity method investment  --   --   (0.11)  -- 
Diluted Non-GAAP net income per share   $ 0.45  $ 0.28  $ 1.59  $ 1.05
         
Reconciliation of GAAP operating loss to non-GAAP operating income        
GAAP operating loss  $ (605)  $ (32,845)  $ (36,010)  $ (40,767)
Amortization of intangibles  17,397  13,703  70,350  25,389
Loss on sale of assets  1  --   403  10
Stock based compensation  3,077  1,948  11,927  6,933
Restructuring (credits) charges  (55)  9,206  2,469  9,536
Corporate development  --   7,789  660  13,083
Fair value adjustment to deferred revenue  14,719  22,911  83,732  35,238
Fair value adjustment to deferred expense   495  538  2,376  739
Non-GAAP operating income  $ 35,029  $ 23,250  $ 135,907  $ 50,161
         
Reconciliation of GAAP operating margin to non-GAAP operating margin        
GAAP operating margin -1% -45% -9% -20%
Amortization of intangibles 14% 15% 14% 11%
Restructuring charges 0% 10% 1% 4%
Corporate development 0% 8% 0% 6%
Fair value adjustment to deferred revenue 13% 33% 21% 17%
Fair value adjustment to deferred expense  0% 1% 0% 0%
Stock based compensation 2% 2% 1% 3%
Non-GAAP operating margin 28% 24% 28% 21%
         
Reconciliation of GAAP operating loss to adjusted EBITDA        
GAAP operating loss  $ (605)  $ (32,845)  $ (36,010)  $ (40,767)
Depreciation and amortization  19,753  15,243  78,981  29,456
Loss on sale of assets  1  --   403  10
Stock based compensation  3,077  1,948  11,927  6,933
Restructuring (credits) charges   (55)  9,206  2,469  9,536
Corporate development  --   7,789  660  13,083
Fair value adjustment to deferred revenue  14,719  22,911  83,732  35,238
Fair value adjustment to deferred expense   495  538  2,376  739
Adjusted EBITDA  $ 37,385  $ 24,790  $ 144,538  $ 54,228
         
Reconciliation of GAAP operating margin to adjusted EBITDA margin        
GAAP operating margin -1% -45% -9% -20%
Depreciation and amortization 16% 17% 15% 13%
Stock based compensation 2% 2% 2% 3%
Restructuring charges 0% 11% 1% 4%
Corporate development 0% 8% 0% 6%
Fair value adjustment to deferred revenue 13% 32% 20% 17%
Fair value adjustment to deferred expense 0% 1% 0% 0%
Adjusted EBITDA margin 30% 26% 29% 23%
         
  Three Months Ended December 31,  Twelve Months Ended December 31, 
  2012  2011  2012  2011 
Stock based compensation        
Subscription (cost of revenue)  $ 346  $ 228  $ 1,312  $ 856
Sales and marketing  805  356  2,872  1,240
Research and development  476  302  1,963  969
General and administration  1,450  1,062  5,780  3,868
Total  $ 3,077  $ 1,948  $ 11,927  $ 6,933
 
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
         
  Three Months Ended December 31,  Twelve Months Ended December 31, 
  2012  2011  2012  2011 
Cash flows from operating activities        
         
Net (loss) income   $ (51,878)  $ 544  $ (122,217)  $ (12,309)
         
Adjustments to reconcile to net cash provided by operating activities:        
Gain (loss) on sale of discontinued operations   --   125  --   (200)
Gain on sale of equity method investment  --   --   (5,156)  -- 
Loss from debt extinguishment  39,331  --   39,331  -- 
Depreciation and amortization  19,753  15,243  78,981  29,456
Stock-based compensation  3,077  1,948  11,927  6,933
Deferred income tax benefit  (4,095)  (50,296)  (17,179)  (50,112)
Amortization of debt issuance costs and other  1,650  5,623  11,420  6,572
Changes in operating assets and liabilities:        
Accounts receivable, net  2,801  (778)  (1,906)  (407)
Prepaid expenses and other assets  3,136  2,508  (3,020)  1,711
Deferred expense  492  1,208  3,004  2,025
Accounts payable  (4,821)  (1,349)  295  (1,509)
Accrued expenses and other liabilities  (1,137)  1,197  (4,755)  1,694
Accrued compensation and benefits  2,755  1,047  (577)  (2,897)
Accrued restructuring  (1,163)  7,209  (4,176)  5,199
Deferred revenue  16,718  20,225  91,993  28,768
Net cash provided by operating activities  26,619  4,454  77,965  14,924
         
Cash flows from investing activities        
         
Business acquisitions, net of cash received  --   (405,120)  --   (405,120)
Proceeds from sale of discontinued operations  --   --   --   325
Proceeds from sale of equity method investment  --   --   7,197  -- 
Purchase of property and equipment  (3,308)  (671)  (22,298)  (4,270)
Other  (76)  --   (76)  83
Net cash used in investing activities  (3,385)  (405,791)  (15,177)  (408,982)
         
Cash flows from financing activities        
         
Stock issuance costs  (10)  (7)  (21)  (16)
Common stock repurchased  (1,186)  (4)  (4,683)  (452)
Debt issuance costs  (3,720)  (21,242)  (3,720)  (21,242)
Issuance of debt  643,205  745,500  643,205  745,500
Payment of debt   (659,074)  (325,738)  (701,574)  (341,748)
Proceeds from exercise of stock options and other  1,244  440  5,822  9,073
Net cash (used in) provided by financing activities  $ (19,541)  $ 398,949  $ (60,971)  $ 391,115
         
Net increase (decrease) in cash and cash equivalents  3,693  (2,388)  1,817  (2,943)
Cash and cash equivalents, beginning of period  11,487  15,752  13,364  16,307
Cash and cash equivalents, end of period  $ 15,180  $ 13,364  $ 15,181  $ 13,364
         
Supplemental cash flow information:        
Interest paid  $ 14,302  $ 4,060  $ 57,293   $ 7,786
Income tax paid  $ 55  $ 162  $ 252  $ 1,089
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