Web.com Group, Inc.
May 1, 2014

Web.com Reports First Quarter 2014 Financial Results

JACKSONVILLE, Fla., May 1, 2014 (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, 2014.

"Web.com began 2014 with solid first quarter results that built upon our success in adding subscribers and expanding average revenue per user, which drove double-digit revenue growth. Our strategy of cross-selling a broad and growing suite of value-added services across our 3.2 million subscribers is driving positive trends in the business and we continue to see an opportunity for further improvement," said David L. Brown, chairman, chief executive officer and president of Web.com.

Brown added, "We have established a unique competitive position combining our proprietary technology platforms, well-trained customer service and sales teams and proven marketing strategies. Our increasing scale enables continued investment for growth to expand our opportunities to serve the large, underpenetrated small business market, while also maintaining best-in-class profitability."

Summary of First Quarter 2014 Financial Results:

First Quarter and Recent Business Highlights:

Conference Call Information

Management will host a conference call today, May 1, 2014, at 5:00 p.m. ET, to discuss Web.com's first 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 May 8, 2014 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 13579780.

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 meets the needs of small businesses anywhere along their lifecycle with affordable, subscription-based solutions including domains, hosting, website design and management, search engine optimization, online marketing campaigns, local sales leads, social media, mobile products and eCommerce solutions. 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 the unique competitiveness of our technology platforms and proven marketing strategies, the effectiveness of our strategy to cross-sell to help drive double-digit growth and our increasing scale enabling our continued investment for growth, 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, 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 March 31,
 20142013
     
Revenue $ 133,843 $ 115,546
Cost of Revenue 46,586 42,640
     
Gross profit 87,257 72,906
     
Operating expenses:    
Sales and marketing 37,533 33,364
Research and development 7,198 8,212
General and administrative 13,742 13,780
Depreciation and amortization 19,239 20,040
Total operating expenses 77,712 75,396
Income (loss) from operations 9,545 (2,490)
     
Interest expense, net (7,492) (9,951)
Loss from debt extinguishment (19,526)
Net income (loss) before income taxes 2,053 (31,967)
Income tax expense (1,563) (14,536)
Net income (loss) $ 490 $ (46,503)
     
Other comprehensive (loss) income:    
Unrealized (loss) gain on investments, net of tax  (2)   9
Total comprehensive income (loss)  $ 488  $ (46,494) 
     
Basic earnings per share:    
Net income (loss) per common share  $ 0.01  $ (0.97)
Diluted earnings per share:    
Net income (loss) per common share  $ 0.01  $ (0.97)
 
Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
     
 March 31, 2014December 31, 2013
     
Assets    
Current assets:    
Cash and cash equivalents  $ 15,228  $ 13,806
Accounts receivable, net of allowance of $1,560 and $1,545, respectively 20,565 17,062
Prepaid expenses 12,173 7,348
Deferred expenses 64,387 62,073
Deferred taxes 30,477 35,318
Other current assets 8,901 2,837
Total current assets 151,731 138,444
     
Property and equipment, net 41,652 42,090
Deferred expenses 55,883 57,235
Goodwill 630,432 627,845
Intangible assets, net 392,100 401,921
Other assets 4,990 10,224
Total assets  $ 1,276,788  $ 1,277,759
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 7,874  $ 10,351
Accrued expenses 12,182 14,449
Accrued compensation and benefits 5,212 13,423
Deferred revenue 217,282 208,856
Current portion of debt 52,593 6,586
Other liabilities 4,968 3,651
Total current liabilities 300,111 257,316
     
Deferred revenue 190,438 186,539
Long-term debt 507,003 556,506
Deferred tax liabilities 98,991 102,421
Other long-term liabilities 6,033 4,932
Total liabilities 1,102,576 1,107,714
Stockholders' equity:    
Common stock, $0.001 par value per share: 150,000,000 shares authorized, 51,757,187 and 51,193,230 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively 52 51
Additional paid-in capital 531,779 528,101
Accumulated other comprehensive income 18 20
Accumulated deficit (357,637) (358,127)
Total stockholders' equity 174,212 170,045
Total liabilities and stockholders' equity  $ 1,276,788  $ 1,277,759
 
Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
 Three months ended March 31,
 20142013
Reconciliation of GAAP revenue to non-GAAP revenue    
GAAP revenue  $ 133,843  $ 115,546
Fair value adjustment to deferred revenue 7,391 12,547
Non-GAAP revenue $ 141,234 $ 128,093
     
Reconciliation of GAAP net income (loss) to non-GAAP net income    
GAAP net income (loss)  $ 490  $ (46,503) 
Amortization of intangibles 16,184 17,286
Loss on sale of assets (6)
Stock based compensation 4,504 6,365
Income tax expense 1,563 14,536
Corporate development 40
Amortization of debt discounts and fees 2,718 583
Cash income tax expense (132) (286)
Fair value adjustment to deferred revenue 7,391 12,547
Fair value adjustment to deferred expense 301 454
Loss on debt extinguishment 19,526
Non-GAAP net income  $ 33,059  $ 24,502
     
Reconciliation of GAAP basic net income (loss) per share to non-GAAP basic net income per share    
Basic GAAP net income (loss)  $ 0.01  $ (0.97) 
Amortization of intangibles 0.32 0.36
Loss on sale of assets
Stock based compensation 0.09 0.13
Income tax expense 0.03 0.30
Corporate development
Amortization of debt discounts and fees 0.05 0.01
Cash income tax expense (0.01)
Fair value adjustment to deferred revenue 0.15 0.26
Fair value adjustment to deferred expense 0.01 0.01
Loss on debt extinguishment 0.42
Basic Non-GAAP net income per share  $ 0.66  $ 0.51
   
   
Reconciliation of GAAP diluted net income (loss) per share to non-GAAP diluted net income per shareThree months ended March 31,
Diluted shares:20142013
Basic weighted average common shares 50,334 48,085
Diluted stock options 3,546 2,134
Diluted restricted stock 703 681
Total diluted weighted average common shares 54,583 50,900
     
Diluted GAAP net income (loss) per share  $ 0.01  $ (0.97) 
Diluted equity 0.06
Amortization of intangibles 0.29 0.33
Loss on sale of assets
Stock based compensation 0.08 0.13
Income tax expense 0.03 0.29
Corporate development
Amortization of debt discounts and fees 0.05 0.01
Cash income tax expense (0.01)
Fair value adjustment to deferred revenue 0.14 0.25
Fair value adjustment to deferred expense 0.01 0.01
Loss on debt extinguishment 0.38
Diluted Non-GAAP net income per share  $ 0.61  $ 0.48
     
Reconciliation of GAAP operating income (loss) to non-GAAP operating income    
GAAP operating income (loss)  $ 9,545  $ (2,490)
Amortization of intangibles 16,184 17,286
Loss on sale of assets (6)
Stock based compensation 4,504 6,365
Corporate development 40
Fair value adjustment to deferred revenue 7,391 12,547
Fair value adjustment to deferred expense 301 454
Non-GAAP operating income  $ 37,965  $ 34,156
     
Reconciliation of GAAP operating margin to non-GAAP operating margin    
GAAP operating margin 7 % (2) %
Amortization of intangibles 11 13
Loss on sale of assets
Stock based compensation 3 5
Corporate development
Fair value adjustment to deferred revenue 6 10
Fair value adjustment to deferred expense 1
Non-GAAP operating margin 27 % 27 %
   
Reconciliation of GAAP operating income (loss) to adjusted EBITDAThree months ended March 31,
 20142013
GAAP operating income (loss)  $ 9,545  $ (2,490) 
Depreciation and amortization 19,239 20,040
Loss on sale of assets (6)
Stock based compensation 4,504 6,365
Corporate development 40
Fair value adjustment to deferred revenue 7,391 12,547
Fair value adjustment to deferred expense 301 454
Adjusted EBITDA $ 41,020 $ 36,910
     
Reconciliation of GAAP operating margin to adjusted EBITDA margin    
GAAP operating margin 7 % (2) %
Depreciation and amortization 13 16
Loss on sale of assets
Stock based compensation 3 5
Corporate development
Fair value adjustment to deferred revenue 6 10
Fair value adjustment to deferred expense
Adjusted EBITDA margin 29 % 29 %
     
Revenue    
Subscription  $ 131,784  $ 113,280
Professional services and other 2,059 2,266
Total  $ 133,843  $ 115,546
     
Stock based compensation    
Cost of revenue  $ 488  $ 528
Sales and marketing 1,148 1,498
Research and development 737 833
General and administrative 2,131 3,506
Total  $ 4,504  $ 6,365
 
Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
 Three months ended March 31,
 20142013
Cash flows from operating activities    
Net income (loss) $ 490 $ (46,503)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Loss from debt extinguishment 12,286
Depreciation and amortization 19,239 20,040
Stock based compensation 4,504 6,365
Deferred income taxes 1,411 14,217
Amortization of debt issuance costs 2,719 577
Changes in operating assets and liabilities:    
Accounts receivable, net (3,173) (1,747)
Prepaid expenses and other assets (4,085) (5,098)
Deferred expenses (941) 460
Accounts payable (3,706) 2,045
Accrued expenses and other liabilities (795) 2,469
Accrued compensation and benefits (8,243) (11,133)
Accrued restructuring costs and other reserves (1,139) (731)
Deferred revenue 12,325 17,786
Net cash provided by operating activities 18,606 11,033
     
Cash flows from investing activities    
Business acquisitions, net of cash acquired (7,437)
Capital expenditures (2,921) (4,496)
Net cash used in investing activities (10,358) (4,496)
     
Cash flows from financing activities    
Stock issuance costs (24) (2)
Common stock repurchased (4,956) (5,666)
Payments of long-term debt (15,000) (669,576)
Proceeds from exercise of stock options 4,154 1,085
Proceeds from borrowings on long-term debt 658,350
Proceeds from borrowings on revolving credit facility 9,000 10,000
Debt issuance costs (2,322)
Net cash used in financing activities (6,826) (8,131)
     
Net increase (decrease) in cash and cash equivalents 1,422 (1,594)
Cash and cash equivalents, beginning of year 13,806 15,181
Cash and cash equivalents, end of period $ 15,228 $ 13,587
     
Supplemental cash flow information    
Interest paid $ 5,526 $ 15,635
Income tax paid (received) $ 191 $ (31)
CONTACT: Investors:

         Jenny Kobin

         904-680-6909

         jkobin@web.com

         

         Media:

         John Herbkersman

         904-251-6297

         jherbkersman@web.com