Web.com Group, Inc.
Nov 5, 2013

Web.com Reports Third Quarter 2013 Financial Results

JACKSONVILLE, Fla., Nov. 5, 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 third quarter ended September 30, 2013.

"Web.com posted strong results for the third quarter, with both revenue and profitability exceeding the high end of our guidance," said David Brown, Chairman and CEO of Web.com. "We are delivering the acceleration in revenue and average revenue per user growth that we targeted through our strategy of cross-selling our value-added services into our three million plus subscriber base, while consistently adding net subscribers and maintaining best-in-class customer retention rates. We are continuing to use our solid cash flow to reduce our debt balance."

Brown added, "Our investments in building the Web.com brand are paying off and increasing our profile among small businesses, which is driving improved efficiency in our net subscriber investments. The drivers of our business are trending in a positive direction and we believe we are well positioned to deliver accelerating revenue growth as we enter 2014."

Summary of Third Quarter 2013 Financial Results:

Third Quarter and Recent Business Highlights:

Conference Call Information

Management will host a conference call today, November 5, 2013, at 5:00 p.m. ET, to discuss Web.com's third quarter financial results and current business outlook. There will be an accompanying slide presentation which will be available on the Investor Relations page of Web.com's website (http://ir.web.com), along with a live webcast and replay of the call. To access the call, dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of this conference call will be available until November 12, 2013 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 10000321.

About Web.com

Web.com Group, Inc. (Nasdaq:WWWW) provides a full range of Internet services to small businesses to help them compete and succeed online. Web.com is a global domain registrar and further meets the needs of small businesses anywhere along their lifecycle with affordable, subscription-based solutions including website design and management, search engine optimization, online marketing campaigns, local sales leads, social media, mobile products, eCommerce solutions and call center services. For more information, please visit www.web.com; follow the company on Twitter @webdotcom or on Facebook at www.facebook.com/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, 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 acceleration in revenue growth, expected subscriber growth and improving efficiency in net subscriber investments, and solid 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 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, and Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission, which are 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 September 30,Nine months ended September 30,
 2013201220132012
         
Revenue $ 125,197 $ 105,753 $ 361,191 $ 296,213
Cost of Revenue 42,692 40,195 128,211 118,603
         
Gross profit 82,505 65,558 232,980 177,610
         
Operating expenses:        
Sales and marketing 36,386 30,892 104,846 86,775
Research and development 8,184 7,883 24,804 26,049
General and administrative 13,139 11,417 38,803 38,439
Restructuring expense (benefit) 1,171 (32) 2,524
Depreciation and amortization 20,339 19,816 60,680 59,228
Total operating expenses 78,048 71,179 229,101 213,015
Income (loss) from operations 4,457 (5,621) 3,879 (35,405)
         
Interest expense, net (8,137) (17,166) (26,355) (52,121)
Gain on sale of equity method investment 385 5,156
Loss from debt extinguishment (1,138) (20,663)
Net loss before income taxes (4,818) (22,787) (42,754) (82,370)
Income tax (expense) benefit (1,170) 1,285 (19,481) 12,031
Net loss $ (5,988) $ (21,502) $ (62,235) $ (70,339)
         
Other comprehensive income:        
Unrealized gain on investments, net of tax 8 5 13 5
Total comprehensive loss $ (5,980) $ (21,497) $ (62,222) $ (70,334)
         
Basic earnings per share:        
Net loss per common share $ (0.12) $ (0.45) $ (1.28) $ (1.50)
Diluted earnings per share:        
Net loss per common share $ (0.12) $ (0.45) $ (1.28) $ (1.50)
 
 
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
   
 September 30, 2013December 31, 2012
 (unaudited)(audited)
     
Assets    
Current assets:    
Cash and cash equivalents $ 10,360 $ 15,181
Accounts receivable, net of allowance of $1,513 and $1,098, respectively 18,383 16,247
Prepaid expenses 8,831 6,697
Deferred expenses 61,421 59,255
Deferred taxes 19,418 17,892
Other current assets 6,596 5,116
Total current assets 125,009 120,388
     
Property and equipment, net 41,544 40,079
Deferred expenses 59,199 63,147
Goodwill 627,845 627,845
Intangible assets, net 418,038 469,703
Other assets 6,110 6,817
Total assets $ 1,277,745 $ 1,327,979
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable $ 7,507 $ 6,385
Accrued expenses 14,501 12,802
Accrued compensation and benefits 9,259 15,413
Accrued restructuring costs and other reserves 244 1,477
Deferred revenue 207,361 190,618
Current portion of debt 6,600 4,681
Other liabilities 2,779 2,556
Total current liabilities 248,251 233,932
     
Deferred revenue 186,550 175,816
Long-term debt 586,964 688,140
Deferred tax liabilities 84,713 64,126
Other long-term liabilities 5,909 4,352
Total liabilities 1,112,387 1,166,366
Stockholders' equity:    
Common stock, $0.001 par value per share: 150,000,000 shares authorized, 50,854,218 and 49,175,642 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively 51 49
Additional paid-in capital 519,987 454,022
Accumulated other comprehensive income 18 5
Accumulated deficit (354,698) (292,463)
Total stockholders' equity 165,358 161,613
Total liabilities and stockholders' equity $ 1,277,745 $ 1,327,979
 
 
Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
         
 Three months ended Nine months ended
 September 30,September 30,
 2013201220132012
Reconciliation of GAAP revenue to non-GAAP revenue        
GAAP revenue $ 125,197 $ 105,753 $ 361,191 $ 296,213
Fair value adjustment to deferred revenue 9,590 18,408 33,079 69,014
Non-GAAP revenue $ 134,787 $ 124,161 $ 394,270 $ 365,227
         
Reconciliation of GAAP net loss to non-GAAP net income        
GAAP net loss $ (5,988) $ (21,502) $ (62,235) $ (70,339)
Amortization of intangibles 17,209 17,588 51,715 52,953
Loss on sale of assets 55 135 402
Stock based compensation 4,055 3,112 14,325 8,850
Income tax expense (benefit) 1,170 (1,285) 19,480 (12,031)
Restructuring expense (benefit) 1,171 (32) 2,524
Corporate development 16 660
Amortization of debt discounts and fees 1,623 3,071 2,646 9,370
Cash income tax benefit (expense) 122 (335) (357) (1,033)
Fair value adjustment to deferred revenue 9,590 18,408 33,079 69,014
Fair value adjustment to deferred expense 367 552 1,228 1,880
Loss on debt extinguishment 1,138 20,663
Gain on sale of equity method investment (385) (5,156)
Non-GAAP net income $ 29,341 $ 20,796 $ 80,262 $ 57,094
         
Reconciliation of GAAP basic net loss per share to non-GAAP basic net income per share        
Basic GAAP net loss $ (0.12) $ (0.45) $ (1.28) $ (1.50)
Amortization of intangibles 0.36 0.38 1.07 1.14
Loss on sale of assets 0.01
Stock based compensation 0.08 0.07 0.29 0.19
Income tax expense (benefit) 0.02 (0.03) 0.40 (0.26)
Restructuring expense (benefit) 0.02 0.05
Corporate development 0.01
Amortization of debt discounts and fees 0.03 0.06 0.05 0.20
Cash income tax benefit (expense) (0.01) (0.01) (0.02)
Fair value adjustment to deferred revenue 0.20 0.39 0.68 1.47
Fair value adjustment to deferred expense 0.01 0.01 0.03 0.04
Loss on debt extinguishment 0.02 0.42
Gain on sale of equity method investment (0.11)
Basic Non-GAAP net income per share $ 0.60 $ 0.44 $ 1.65 $ 1.22
         
Reconciliation of GAAP diluted net loss per share to non-GAAP diluted net income per shareThree months ended Nine months ended
 September 30,September 30,
Diluted shares:2013201220132012
Basic weighted average common shares 49,243 47,307 48,670 46,834
Diluted stock options 3,502 2,339 2,843 2,249
Diluted restricted stock 810 1,155 763 1,152
Total diluted weighted average common shares 53,555 50,801 52,276 50,235
         
Diluted GAAP net loss per share $ (0.12) $ (0.45) $ (1.28) $ (1.50)
Diluted equity 0.01 0.03 0.09 0.10
Amortization of intangibles 0.32 0.35 1.01 1.05
Loss on sale of assets 0.01
Stock based compensation 0.08 0.06 0.27 0.18
Income tax expense (benefit) 0.02 (0.03) 0.37 (0.24)
Restructuring expense (benefit) 0.02 0.05
Corporate development 0.01
Amortization of debt discounts and fees 0.03 0.06 0.05 0.19
Cash income tax benefit (expense) (0.01) (0.01) (0.02)
Fair value adjustment to deferred revenue 0.18 0.37 0.63 1.37
Fair value adjustment to deferred expense 0.01 0.01 0.02 0.04
Loss on debt extinguishment 0.02 0.40
Gain on sale of equity method investment (0.01) (0.10)
Diluted Non-GAAP net income per share $ 0.55 $ 0.41 $ 1.54 $ 1.14
         
Reconciliation of GAAP operating income (loss) to non-GAAP operating income        
GAAP operating income (loss) $ 4,457 $ (5,621) $ 3,879 $ (35,405)
Amortization of intangibles 17,209 17,588 51,715 52,953
Loss on sale of assets 55 135 402
Stock based compensation 4,055 3,112 14,325 8,850
Restructuring expense (benefit) 1,171 (32) 2,524
Corporate development 16 660
Fair value adjustment to deferred revenue 9,590 18,408 33,079 69,014
Fair value adjustment to deferred expense 367 552 1,228 1,880
Non-GAAP operating income $ 35,733 $ 35,226 $ 104,329 $ 100,878
         
Reconciliation of GAAP operating margin to non-GAAP operating margin        
GAAP operating margin 4% (5)% 1% (12)%
Amortization of intangibles 12 12 12 13
Loss on sale of assets
Stock based compensation 3 3 4 2
Restructuring expense (benefit) 1 1
Corporate development
Fair value adjustment to deferred revenue 8 17 9 23
Fair value adjustment to deferred expense 1
Non-GAAP operating margin 27% 28% 26% 28%
         
         
Reconciliation of GAAP operating income (loss) to adjusted EBITDAThree months ended Nine months ended
 September 30,September 30,
 2013201220132012
GAAP operating income (loss) $ 4,457 $ (5,621) $ 3,879 $ (35,405)
Depreciation and amortization 20,339 19,816 60,680 59,228
Loss on sale of assets 55 135 402
Stock based compensation 4,055 3,112 14,325 8,850
Restructuring expense (benefit) 1,171 (32) 2,524
Corporate development 16 660
Fair value adjustment to deferred revenue 9,590 18,408 33,079 69,014
Fair value adjustment to deferred expense 367 552 1,228 1,880
Adjusted EBITDA $ 38,863 $ 37,454 $ 113,294 $ 107,153
         
Reconciliation of GAAP operating margin to adjusted EBITDA margin        
GAAP operating margin 4% (5)% 1% (12)%
Depreciation and amortization 14 14 15 14
Loss on sale of assets
Stock based compensation 3 3 4 2
Restructuring expense (benefit) 1 1
Corporate development
Fair value adjustment to deferred revenue 8 17 9 23
Fair value adjustment to deferred expense 1
Adjusted EBITDA margin 29% 30% 29% 29%
         
Revenue        
Subscription $ 122,507 $ 102,279 $ 353,474 $ 287,451
Professional services and other 2,690 3,474 7,717 8,762
Total $ 125,197 $ 105,753 $ 361,191 $ 296,213
         
Stock based compensation        
Cost of revenue $ 435 $ 322 $ 1,400 $ 965
Sales and marketing 961 705 3,414 2,066
Research and development 664 500 2,140 1,488
General and administrative 1,996 1,585 7,371 4,331
Total $ 4,056 $ 3,112 $ 14,325 $ 8,850
 
 
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands, except for per share amounts)
(unaudited)
         
 Three months ended Nine months ended
 September 30,September 30,
 2013201220132012
Cash flows from operating activities        
Net loss $ (5,988) $ (21,502) $ (62,235) $ (70,339)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Gain on sale of equity method investment (385) (5,156)
Loss from debt extinguishment 1,138 13,424
Depreciation and amortization 20,339 19,816 60,680 59,228
Stock based compensation 4,056 3,112 14,325 8,850
Deferred income taxes 1,277 (1,627) 19,062 (13,084)
Amortization of debt issuance costs 1,553 3,071 2,649 9,368
Other 135 135 402
Changes in operating assets and liabilities:        
Accounts receivable, net (179) (2,365) (2,136) (4,707)
Prepaid expenses and other assets (3,251) (1,416) (6,116) (6,156)
Deferred expenses 25 2,888 1,782 2,512
Accounts payable (2,089) 5,950 2,145 5,116
Accrued expenses and other liabilities 604 (1,260) 3,480 (3,618)
Accrued compensation and benefits 1,213 453 (6,155) (3,332)
Accrued restructuring costs and other reserves (59) (1,233) (3,013)
Deferred revenue 3,623 13,037 27,475 75,275
Net cash provided by operating activities 22,456 20,098 66,897 51,346
         
Cash flows from investing activities        
Proceeds from sale of equity method investment 385 7,197
Capital expenditures (3,366) (11,673) (11,586) (18,990)
Other (50)
Net cash used in investing activities (3,366) (11,673) (11,251) (11,793)
         
Cash flows from financing activities        
Stock issuance costs (16) (11) (30) (11)
Common stock repurchased (320) (298) (5,986) (3,497)
Payments of long-term debt (281,000) (14,500) (982,076) (42,500)
Proceeds from exercise of stock options 4,023 1,123 9,858 4,578
Proceeds from long-term debt issued 252,281 920,631
Debt issuance costs (497) (2,864)
Net cash used in financing activities (25,529) (13,686) (60,467) (41,430)
         
Net decrease in cash and cash equivalents (6,439) (5,261) (4,821) (1,877)
Cash and cash equivalents, beginning of year 16,799 16,748 15,181 13,364
Cash and cash equivalents, end of period $ 10,360 $ 11,487 $ 10,360 $ 11,487
         
Supplemental cash flow information        
Interest paid $ 6,775 $ 14,216 $ 30,415 $ 43,039
Income tax paid $ 184 $ 95 $ 374 $ 196
CONTACT: Investors:

         Jenny Kobin

         904-680-6909

         jkobin@web.com

         

         Media:

         John Herbkersman

         904-251-6297

         jherbkersman@web.com