Web.com Group, Inc.
May 2, 2013

Web.com Reports First Quarter 2013 Financial Results

JACKSONVILLE, Fla., May 2, 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 first quarter ended March 31, 2013.

"Web.com delivered a strong performance to start 2013, with first quarter revenue and profitability exceeding the high end of our guidance," said David Brown, Chairman and CEO of Web.com. "The successful expansion of our average revenue per user and 3 million plus subscriber base is improving the long-term growth profile of Web.com. We also remain focused on maintaining our strong margins and looking for opportunities to further enhance profitability, such as our recent debt re-financings that are expected to drive annualized interest savings of more than $18 million."

Brown added, "We continue to invest in initiatives that will expand adoption of our higher value-added products and services. During 2013, we have already added eight new geographic markets with our Feet on the Street program and kicked off our series of Small Business Forums in conjunction with our PGA sponsorship of the Web.com Tour. In addition, the roll out of new services such as FaceBook Boost and Full-Service Search Engine Optimization further enhances our broad suite of solutions."

Summary of First Quarter 2013 Financial Results:

First Quarter and Recent Business Highlights:

Conference Call Information

Management will host a conference call today May 2, 2013, 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 411129. 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 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, email marketing, general contractor leads, franchise and homeowner association websites, 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:

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 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, risks related to the successful offering of the products and services of Web.com and Network Solutions; 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, 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 Statement of Comprehensive Loss
(in thousands, except for per share data)
(unaudited)
 
 Three months ended March 31,
 20132012
Revenue $115,546 $91,514
Cost of revenue 42,640 38,608
     
Gross profit 72,906 52,906
     
Operating expenses:    
Sales and marketing 33,364 26,844
Research and development 8,212 9,707
General and administrative 13,780 14,306
Restructuring charges 912
Depreciation and amortization 20,040 19,679
Total operating expenses 75,396 71,448
Loss from operations (2,490) (18,542)
     
Interest expense, net (9,951) (17,776)
Loss from debt extinguishment (19,526)
Net loss before income taxes (31,967) (36,318)
Income tax (expense) benefit (14,536) 6,539
Net loss $(46,503) $(29,779)
     
Other comprehensive income:    
Unrealized gains on investments, net of tax 9
Total comprehensive loss $(46,494) $(29,779)
     
Basic earnings per share:    
Net loss per common share $(0.97) $(0.65)
Diluted earnings per share:    
Net loss per common share $(0.97) $(0.65)
     
 
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
 
 March 31,
2013
December 31, 2012
 (unaudited)(audited)
Assets    
Current assets:    
Cash and cash equivalents $13,587 $15,181
Accounts receivable, net of allowance of $2,281 and $2,337, respectively 16,754 15,007
Prepaid expenses 10,776 6,697
Deferred expenses 59,311 59,255
Deferred taxes 13,781 18,092
Other current assets 4,984 5,116
Total current assets 119,193 119,348
     
Property and equipment, net 40,786 40,079
Deferred expenses 62,632 63,147
Goodwill 628,176 628,176
Intangible assets, net 452,417 469,703
Other assets 5,581 6,817
Total assets $1,308,785 $1,327,270
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable $7,389 $6,385
Accrued expenses 12,990 11,562
Accrued compensation and benefits 4,280 15,413
Accrued restructuring costs and other reserves 746 1,477
Deferred revenue 201,174 191,149
Current portion of debt 42,217 4,681
Other liabilities 2,691 2,556
Total current liabilities 271,487 233,223
     
Deferred revenue 183,577 175,816
Long-term debt 657,529 688,140
Deferred tax liabilities 74,032 64,126
Other long-term liabilities 5,258 4,352
Total liabilities 1,191,883 1,165,657
Stockholders' equity:    
Common stock, $0.001 par value per share: 150,000,000 shares authorized, 49,692,899 and 49,175,642 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively 50 49
Additional paid-in capital 455,804 454,022
Accumulated other comprehensive income 14 5
Accumulated deficit (338,966) (292,463)
Total stockholders' equity 116,902 161,613
Total liabilities and stockholders' equity $1,308,785 $1,327,270

 

Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 
 Three months ended March 31,
 20132012
Reconciliation of GAAP revenue to non-GAAP revenue    
GAAP revenue $115,546 $91,514
Fair value adjustment to deferred revenue 12,547 27,823
Non-GAAP revenue $128,093 $119,337
     
Reconciliation of GAAP net loss to non-GAAP net income    
GAAP net loss $(46,503) $(29,779)
Amortization of intangibles 17,286 17,692
(Gain) loss on sale of assets (6) 402
Stock based compensation 6,365 2,680
Income tax expense (benefit) 14,536 (6,539)
Restructuring charges 912
Corporate development 334
Amortization of deferred financing fees 583 3,323
Cash income tax expense (286) (285)
Fair value adjustment to deferred revenue 12,547 27,823
Fair value adjustment to deferred expense 454 676
Loss on debt extinguishment 19,526
Non-GAAP net income $24,502 $17,239
     
Reconciliation of GAAP basic net loss per share to non-GAAP basic net income per share    
Basic GAAP net loss $(0.97) $(0.65)
Amortization of intangibles 0.36 0.39
(Gain) loss on sale of assets 0.01
Stock based compensation 0.13 0.06
Income tax expense (benefit) 0.30 (0.14)
Restructuring charges 0.02
Corporate development 0.01
Amortization of deferred financing fees 0.01 0.07
Cash income tax expense (0.01) (0.01)
Fair value adjustment to deferred revenue 0.26 0.60
Fair value adjustment to deferred expense 0.01 0.01
Loss on debt extinguishment 0.42
Basic Non-GAAP net income per share $0.51 $0.37
     
Reconciliation of GAAP diluted net loss per share to non-GAAP diluted net income per share    
Diluted shares:    
Basic weighted average common shares 48,085 46,140
Diluted stock options 2,134 2,279
Diluted restricted stock 681 1,096
Total diluted weighted average common shares 50,900 49,515
     
Diluted GAAP net loss per share $(0.97) $(0.65)
Diluted equity 0.06 0.04
Amortization of intangibles 0.33 0.37
(Gain) loss on sale of assets 0.01
Stock based compensation 0.13 0.05
Income tax expense (benefit) 0.29 (0.13)
Restructuring charges 0.02
Corporate development 0.01
Amortization of deferred financing fees 0.01 0.07
Cash income tax expense (0.01) (0.01)
Fair value adjustment to deferred revenue 0.25 0.56
Fair value adjustment to deferred expense 0.01 0.01
Loss on debt extinguishment 0.38
Diluted Non-GAAP net income per share $0.48 $0.35
     
Reconciliation of GAAP operating loss to non-GAAP operating income    
GAAP operating loss $(2,490) $(18,542)
Amortization of intangibles 17,286 17,692
(Gain) loss on sale of assets (6) 402
Stock based compensation 6,365 2,680
Restructuring charges 912
Corporate development 334
Fair value adjustment to deferred revenue 12,547 27,823
Fair value adjustment to deferred expense 454 676
Non-GAAP operating income $34,156 $31,977
     
Reconciliation of GAAP operating margin to non-GAAP operating margin    
GAAP operating margin (2)% (20)%
Amortization of intangibles 13 15
(Gain) loss on sale of assets
Stock based compensation 5 2
Restructuring charges 1
Corporate development
Fair value adjustment to deferred revenue 10 28
Fair value adjustment to deferred expense 1 1
Non-GAAP operating margin 27% 27%
     
Reconciliation of GAAP operating loss to adjusted EBITDA    
GAAP operating loss $(2,490) $(18,542)
Depreciation and amortization 20,040 19,679
(Gain) loss on sale of assets (6) 402
Stock based compensation 6,365 2,680
Restructuring charges 912
Corporate development 334
Fair value adjustment to deferred revenue 12,547 27,823
Fair value adjustment to deferred expense 454 676
Adjusted EBITDA $36,910 $33,964
     
Reconciliation of GAAP operating margin to adjusted EBITDA margin    
GAAP operating margin (2)% (20)%
Depreciation and amortization 16 16
(Gain) loss on sale of assets
Stock based compensation 5 2
Restructuring charges 1
Corporate development
Fair value adjustment to deferred revenue 10 28
Fair value adjustment to deferred expense 1
Adjusted EBITDA margin 29% 28%
     
Revenue    
Subscription $113,280 $88,850
Professional services and other 2,266 2,664
Total $115,546 $91,514
     
Stock based compensation    
Cost of revenue $528 $305
Sales and marketing 1,498 616
Research and development 833 481
General and administration 3,506 1,278
Total $6,365 $2,680
 
 
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands, except for per share amounts)
(unaudited)
 
 Three months ended March 31,
 20132012
Cash flows from operating activities    
Net loss $(46,503) $(29,779)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Loss from debt extinguishment 12,286
Depreciation and amortization 20,040 19,679
Stock based compensation 6,365 2,680
Deferred income taxes 14,217 (6,824)
Amortization of debt issuance costs and other 577 3,725
Changes in operating assets and liabilities:    
Accounts receivable, net (1,747) (2,156)
Prepaid expenses and other assets (5,098) (3,294)
Deferred expenses 460 (1,039)
Accounts payable 2,045 2,958
Accrued expenses and other liabilities 2,469 (972)
Accrued compensation and benefits (11,133) (8,136)
Accrued restructuring (731) (1,624)
Deferred revenue 17,786 39,605
Net cash provided by operating activities 11,033 14,823
     
Cash flows from investing activities    
Capital expenditures (4,496) (2,679)
Net cash used in investing activities (4,496) (2,679)
     
Cash flows from financing activities    
Stock issuance costs (2) (86)
Common stock repurchased (5,666) (3,199)
Payments of long-term debt (669,576) (11,500)
Proceeds from exercise of stock options 1,085 1,602
Proceeds from long-term debt issued 668,350
Debt issuance costs (2,322)
Net cash used in financing activities (8,131) (13,183)
     
Net decrease in cash and cash equivalents (1,594) (1,039)
Cash and cash equivalents, beginning of period 15,181 13,364
Cash and cash equivalents, end of period $13,587 $12,325
     
Supplemental cash flow information    
Interest paid $15,635 $14,755
Income tax (received) paid $(31) $58
CONTACT: Web.com

         Jenny Kobin

         Vice President, Investor Relations

         904-680-6909

         jkobin@web.com

         

         ICR for Web.com

         Brian Denyeau

         646-277-1251

         brian.denyeau@icrinc.com