IE 11 is not supported. For an optimal experience visit our site on another browser.

CORRECTING AND REPLACING -- Web.com Reports Fourth Quarter and Full Year 2010 Financial Results

Non-GAAP Revenue and Net Income Per Diluted Share at the High-End or Above Guidance
/ Source: GlobeNewswire

Non-GAAP Revenue and Net Income Per Diluted Share at the High-End or Above Guidance

4Q Adjusted EBITDA Grows to a Record $9.1 Million

Customer Churn Reduced to Record Lows

In a release issued earlier today with the same headline, please note that the figures for Non-GAAP net income for the three months ended December 31, 2010 and the twelve months ended December 31, 2010 have both changed in the Reconciliation of GAAP to Non-GAAP Results table. The full, corrected release follows.

JACKSONVILLE, Fla., Feb. 8, 2011 (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, 2010.   

David Brown, Chairman and CEO of Web.com, said, "Continued execution at a high level led to fourth quarter non-GAAP revenue that was at the high-end of our guidance and profitability that again exceeded our expectations. This achievement represents a solid finish to a year in which we stabilized and began modestly growing our internet services business, improved customer churn to record low levels and closed the transformative acquisition of Register.com."

Brown added, "Web.com has become one of the largest and most profitable online marketing businesses in the world. We believe the company has the potential to accelerate revenue growth as we increase Web.com's investments in sales and marketing and execute our cross-sell/upsell strategy with our recently acquired domain name customers. As we continue to integrate our operations, realize the significant post-merger cost savings and benefit from increased scale, we believe that we have the opportunity to generate substantial shareholder value."

Summary of Fourth Quarter 2010 Financial Results:

  • Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $37.6 million for the fourth quarter of 2010, compared to $26.3 million for the fourth quarter of 2009. Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $45.0 million for the fourth quarter of 2010, at the high-end of the company's guidance of $44.0 million to $45.0 million. 
  • Operating loss, calculated in accordance with GAAP, was $4.4 million for the fourth quarter of 2010 and included a $7.6 million negative impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees. For the fourth quarter of 2009, the company reported GAAP operating income of $480 thousand.
  • GAAP net loss from continuing operations was $12.8 million, or ($0.50) per diluted share, for the fourth quarter of 2010, and included the above mentioned impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees. GAAP net income from continuing operations was $2.1 million, or $0.07 per diluted share, in the fourth quarter of 2009. 
  • Non-GAAP operating income was $8.6 million for the fourth quarter of 2010, representing a non-GAAP operating margin of 19% and an increase from $4.3 million for the fourth quarter of 2009.
  • Non-GAAP net income from continuing operations was $6.6 million, or $0.24 per diluted share, for the fourth quarter of 2010, which was above the company's guidance of $0.16 to $0.17 per diluted share. Approximately $0.03 of the per share upside related to a lower-than-expected cash tax rate, while an additional $0.01 of the per share upside resulted from one-time purchase accounting adjustments related to the Register.com acquisition. Non-GAAP net income from continuing operations was $4.3 million, or $0.16 per diluted share, for the fourth quarter of 2009. 
  • Adjusted EBITDA was $9.1 million for the fourth quarter of 2010, an 87% increase from $4.9 million for the fourth quarter of 2009. Non-GAAP operating margin for the fourth quarter was 19%, an increase from 16% in the fourth quarter of 2009.
  • Cash flow from operations was $6.8 million for the fourth quarter of 2010 and $7.9 million excluding the pay down of accrued restructuring expenses and fees associated with the Register.com acquisition. This represented an increase from $3.8 million and $4.2 million, respectively, for the fourth quarter of 2009.

Fourth Quarter and Recent Business Highlights:

  • Consolidated average revenue per user (ARPU) was $15.39 for the fourth quarter of 2010, a sequential increase from over $14 (assuming Register.com was integrated for the full third quarter of 2010).
  • Customer churn was 1.8% for the fourth quarter of 2010, down from 2% in the third quarter of 2010 (assuming Register.com was integrated for the full third quarter).
  • Web.com's total net subscribers were approximately 954,000 at the end of the fourth quarter of 2010, compared to 974,000 at the end of the prior quarter.  This net subscriber count reflects modest growth in Web.com's web services and value add solutions customer base, offset by a reduction in the number of domain name services customers.
  • Web.com paid down approximately $6 million in debt in the fourth quarter, which was $3.8 million more than required under terms of its debt agreement and the second quarter in a row of accelerated prepayment.
  • Web.com introduced a new product, a custom Company Facebook page, to help its small business customers access and leverage the power of social media. 
  • Web.com added two distinguished members to its board of directors: Deborah H. Quazzo and Philip J. Facchina. Quazzo is the co-founder of NeXtAdvisors, a merchant bank providing advisory services to the education and business services sector, and has a 25 year career as an investment banker and entrepreneur, including the co-founding of ThinkEquity Partners. Facchina is currently a Partner and Chief Operating Officer of Ramsey Asset Management, a $500 million long/short hedge fund, following 10 years with FBR Capital Markets' Investment Banking unit, where he was Group Head of Technology, Media & Telecom. Prior to FBR, Facchina served variously as President, Executive VP and Chief Financial Officer of both public and private technology companies.
  • Web.com announced an alliance with SuperMedia, the advertising agency for local small-to-medium sized businesses across the United States, to provide greater opportunities for small business customers to develop, support and expand their online presence.

Conference Call Information

Management will host a conference call to discuss Web.com's results and other matters related to the Company's business and guidance related to future results, today February 8, 2011, at 5:00 p.m. (Eastern Time). A live webcast of the call will be available at the "Investor Relations" page of the Company's website, http://www.web.com. To access the call, dial 877-407-0784 (domestic) or 201-689-8560 (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 364705. 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 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, general contractor leads, franchise and homeowner association websites, shopping cart software, eCommerce web site design and call center services. For more information on the company, please visit or call 1-800-GETSITE.

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 net income attributable to common stockholders, non-GAAP net income per share attributable to common stockholders and non-GAAP operating income 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. Company 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 the Company presents above, management further sets forth its rationale as follows:

  • Non-GAAP Revenue.  We exclude from non-GAAP revenue the impact of the fair value adjustment to acquired deferred revenue because we believe that excluding such measures helps management and investors better understand our revenue trends.
  • Non-GAAP Operating Income. The Company excludes from non-GAAP operating income amortization of intangibles, fair value adjustment to deferred revenue and prepaid registry fees, restructuring charges, corporate development expenses and stock-based compensation charges. Management believes that excluding these items assists investors in evaluating period-over-period changes in the Company's operating income without the impact of items that are not a result of the Company's day-to-day business and operations.
  • Non-GAAP Net Income and Non-GAAP Net Income Per Diluted Share. The Company excludes from non-GAAP net income and non-GAAP net income per diluted share amortization of intangibles, income tax expense, fair value adjustment to deferred revenue and prepaid registry fees, restructuring charges, corporate development expenses, amortization of financing fees, stock-based compensation, and includes cash income tax expense, because management believes that excluding such measures helps investors better understand the Company's operating activities.
  • Adjusted EBITDA. The Company excludes from Adjusted EBITDA depreciation expense, amortization of intangibles, income tax, interest expense, interest income, stock-based compensation, corporate development expenses, and restructuring charges, because management believes that excluding such items helps investors better understand the Company's operating activities.
  • 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:Stock-based compensation.   These expenses consist of expenses for employee stock options and employee stock purchases under ASC 718-10. The Company excludes stock-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses. Prior to the adoption of ASC 718-10 in fiscal 2006, the Company did not include expenses related to employee stock options and employee stock purchases directly in its financial statements, but elected, as permitted, to disclose such expenses in the footnotes to its financial statements. As the Company applies ASC 718-10, it believes that it is useful to its investors to understand the impact of the application of ASC 718-10 to its operational performance, liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. While stock-based compensation expense calculated in accordance with ASC 718-10 constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by the Company and because such expense is not used by management to assess the core profitability of the Company's business operations. The Company further believes these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements. In addition, excluding this item from various non-GAAP measures facilitates comparisons to the Company's competitors' operating results.
  • Amortization of intangibles. The Company incurs amortization of acquired intangibles under ASC 805-10-65. Acquired intangibles primarily consist of customer relationships, non-compete agreements, trade names, and developed technology. The Company expects to amortize for accounting purposes the fair value of the acquired intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated. Although the intangible assets generate revenue for the Company, the item is excluded because this expense is non-cash in nature and because the Company believes the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, excluding this item from various non-GAAP measures facilitates management's internal comparisons to the Company's historical operating results and comparisons to the Company's competitors' operating results.
  • Depreciation expense. The Company incurs depreciation expense associated with its fixed assets. Although the fixed assets generate revenue for the Company, the item is excluded because this expense is non-cash in nature and because the Company believes the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance, liquidity and its ability to invest in research and development and fund acquisitions and capital expenditures. In addition, excluding this item from certain non-GAAP measures facilitates management's internal comparisons to the Company's historical operating results and comparisons to the Company's competitors' operating results.
  • Interest expense and amortization of deferred financing fees. The Company incurs interest expense related to the indebtedness of the Company. This item is excluded because the Company believes the non-GAAP measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, excluding this item from various non-GAAP measures facilitates management's internal comparisons to the Company's historical operating results and comparisons to the Company's competitors' operating results.
  • Interest income. The Company earns interest income related to its cash and cash equivalents. This item is excluded because the Company believes the non-GAAP measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, excluding this item from various non-GAAP measures facilitates management's internal comparisons to the Company's historical operating results and comparisons to the Company's competitors' operating results.
  • Restructuring charges. The Company has recorded restructuring charges. The Company excludes the impact of these expenses from its non-GAAP measures, because such expense is not used by management to assess the core profitability of the Company's business operations. 
  • Income tax expense. Due to the magnitude of the Company's historical net operating losses and related deferred tax asset, the Company excludes income tax expense from its non-GAAP measures primarily because they are not indicative of the cash tax paid by the Company and therefore are not reflective of ongoing operating results. Further, excluding this non-cash item from non-GAAP measures facilitates management's internal comparisons to the Company's historical operating results. The Company also excludes income tax expense altogether from certain non-GAAP financial measures because the Company believes that the non-GAAP measures excluding this item provide meaningful supplemental information regarding the Company's operational performance and facilitates management's internal comparisons to the Company's historical operating results and comparisons to the Company's competitors' operating results.
  • Fair value adjustment to deferred revenue and prepaid registry fees. The Company has recorded a fair value adjustment to acquired deferred revenue and prepaid registry fees in accordance with ASC 805-10-65. The Company excludes the impact of this adjustment from its non-GAAP measures, because doing so results in non-GAAP revenue and non-GAAP net income which are reflective of ongoing operating results and more comparable to historical operating results, since the majority of the Company's revenue is recurring subscription revenue. Excluding the fair value adjustment to deferred revenue and prepaid registry fees therefore facilitates management's internal comparisons to the Company's historical operating results.
  • Corporate development expenses. The Company incurred professional fees to assist us in performing due diligence procedures for the acquisition of Register.com in July 2010. The Company excludes the impact of these expenses from its non-GAAP measures, because such expense is not used by management to assess the core profitability of the Company's business operations. 

Forward-Looking Statements

This press release includes certain "forward-looking statements" including, without limitation, statements regarding the anticipated reach, capabilities and opportunities for the combined company following the Register.com acquisition, expected benefits to merchants and other customers, market opportunities, and expected customer base, 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," "potential," "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, Web.com's ability to integrate the Web.com and Register.com businesses, disruption from the transaction 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 and Register.com's businesses.  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, 2010, 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.

CONTACT: Web.com Press Susan Datz Edelman 904-680-6909 sedelman@web.com ICR for Web.com Investors Kori Doherty 617-956-6730 Kori.doherty@icrinc.com