Web.com Group, Inc.
Feb 11, 2016

Web.com Announces Agreement to Acquire Yodle

JACKSONVILLE, Fla., Feb. 11, 2016 (GLOBE NEWSWIRE) --  Web.com Group, Inc. (Nasdaq:WEB), a leading provider of Internet services and online marketing solutions for small businesses, today announced it has entered into a definitive agreement to acquire Yodle, a leader in local digital marketing, in an all cash transaction.

"The acquisition of Yodle is a natural complement to our strategy at Web.com.  Value added digital marketing solutions are a large and fast growing portion of the market where Web.com has developed a differentiated set of offerings.  This market segment has been a strategic focus for us for several years, and the purchase of Yodle will solidify our position as a leading national provider in this space.  We are pleased to be gaining a company with a strong track record of developing and selling vertically focused solutions that help small businesses attract new business and retain existing customers through cloud based marketing platforms," said David L. Brown, chairman, chief executive officer and president of Web.com.

Brown added, "To put this transaction in perspective, on a combined basis for 2015, Web.com would have had over $765 million in non-GAAP revenues with 50% of its revenue generated from faster growing value added digital marketing solutions.  We expect the transaction to be accretive to non-GAAP earnings per share within the first year as we begin to realize synergies and pay down debt."

Strategic Fit

Yodle is a leading provider of cloud based local marketing solutions for small businesses with approximately 1,400 employees and over $200 million in annual revenue.  They serve approximately 58,000 subscribers at an average revenue per user (ARPU) of approximately $300 per month.  Combining the Web.com and Yodle franchises will have multiple strategic and financial benefits including:

Financing and Financial Impact

Web.com will acquire 100% of the outstanding shares of Yodle with $300 million paid at close and $20 million and $22 million paid at the first and second anniversary of the closing date, respectively.  The purchase price is subject to customary working capital adjustments.  For 2015, the combined company on a pro-forma basis would have had $767 million in non-GAAP revenue and $189 million in adjusted EBITDA, including full run rate synergies of $30 million.  For 2015, the combined company on a pro-forma basis would have had $751 million in GAAP revenue and $49 million of GAAP operating income, excluding any synergies.

The acquisition will be funded with committed bank debt financing consisting of amendments to the existing credit agreements, a new $200 million term loan as well as approximately $100 million from the current revolving credit facility.  Both the term loans and the revolving credit facility will be priced at LIBOR plus 300 basis points with step downs based on leverage ratios.  On a pro-forma basis as of December 31, 2015, Web.com would have had approximately $756 million of gross debt representing a leverage ratio of four times pro-forma adjusted EBITDA, including full run rate synergies of $30 million, and a weighted average cost of debt of 2.6% at current market rates.  In addition, Web.com expects to realize future cash tax savings from gaining approximately $50 million of net operating losses.  Web.com intends to use its strong free cash flow to pay down debt over time.


The transaction is expected to close by the end of the first quarter of 2016, has been approved by both Web.com's and Yodle's board of directors, and is subject to customary closing conditions including regulatory approval under the Hart-Scott-Rodino Antitrust Improvement Act.


J.P. Morgan Securities LLC, BofA Merrill Lynch and Barclays served as financial advisors and Cooley LLP acted as legal counsel to Web.com.  Credit Suisse acted as financial advisor and Lowenstein Sandler LLP served as legal counsel to Yodle.

Conference Call

Web.com will discuss this transaction in conjunction with its previously announced fourth quarter 2015 financial results and business outlook conference call, scheduled for today, February 11, 2016, at 5:00 p.m. ET.  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 877-407-0789 (domestic) or 201-689-8562 (international). A replay of this conference call will be available until February 18, 2016 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 13628646.

About Web.com

Web.com Group, Inc. (Nasdaq:WEB) 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 Web.com on Twitter @webdotcom or on Facebook at 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, in ways that management views or uses to assess the performance of the company. 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, acquiring Yodle will be a significant step in achieving scale in the high end of the market, that the acquisition will be accretive to non-GAAP earnings per share, the expected benefits and achieve synergies Web.com will receive after the closing of the transaction, and the expectation that the transaction will close in the first quarter of 2016, 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 statements are sometimes identified by words such as "will," "expect," "intends," "projected," "estimate," "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; the closing of the acquisition is subject to closing conditions which, of not met, may cause the acquisition not to close; 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 Form 10-Q for the quarter ended September 30, 2015, 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. And Yodle
Reconciliation of GAAP to Non-GAAP Results
($ in thousands)
  Twelve months ended December 31, 2015 
        Pro forma 
  Web.com Yodle Adjustments Combined 
Reconciliation of GAAP Revenue to Non-GAAP Revenue        
GAAP revenue $543,461  $207,851  $-  $751,312  
Fair value adjustment to deferred revenue  15,909   -   -   15,909  
Non-GAAP revenue $559,370  $207,851  $-  $767,221  
Reconciliation of GAAP operating income to adjusted EBITDA       
GAAP operating income $61,714  $(13,051) $-  $48,663  
Depreciation and  amortization  56,345   7,497   -   63,842  
Stock based compensation  20,064   4,284   -   24,348  
Restructuring charges  559   31   -   590  
Corporate development  599   -   -   599  
Deferred initial public offering costs  -   4,594   -   4,594  
Fair value adjustment to deferred revenue  15,909   -   -   15,909  
Fair value adjustment to expense  633   -   -   633  
Synergies  -   -   30,000   30,000  
Adjusted EBITDA $155,823  $3,355  $30,000  $189,178  
Pro forma gross debt as of December 31, 2015$456,000  $-  $300,000  $756,000  
Pro-forma leverage ratio to 2015 Adjusted EBITDA w/synergies     4.0x 


Ira Berger

John Herbkersman