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Web.com Reports Fourth Quarter and Fiscal 2006 Results

March 13, 2007

Web.com Reports Fourth Quarter and Fiscal 2006 Results
ATLANTA, March 13, 2007 (PRIME NEWSWIRE) -- Web.com, Inc. (Nasdaq:WWWW), a leading destination for websites and web services, today reported results for its fourth quarter and fiscal year ended December 31, 2006.

Summary of Fourth Quarter 2006 Results:

  • Total revenues for the quarter were $12.5 million, up from $12.3 million in the third quarter of 2006.
  • Net loss for the quarter was $2.0 million, or $(0.13) per share, versus a loss of $0.6 million, or $(0.04) per share, in the quarter ended September 2006. The decline quarter over quarter includes $1.0 million in legal expenses and $0.6 million in bonus accrual.
  • Adjusted net income from continuing operations (1) was negative $0.8 million, down from $0.1 million in the third quarter of 2006. The decline quarter over quarter includes $1.0 million in legal expenses and $0.6 million in bonus accrual.
  • Net subscribers totaled approximately 155,000 at December 31, 2006, up approximately 3,000 from approximately 152,000 at September 30, 2006.

"Web.com spent 2006 stabilizing the business, implementing cost controls and developing a highly-scalable growth engine," stated Jeff Stibel, President and CEO, Web.com. "This quarter represents another period of strong organic revenue and subscriber growth. I am particularly excited to announce that average revenue per user also grew this quarter and look forward to leveraging our business model further."

"Our net loss increased as a result of annual bonuses and higher legal expenses as we move toward closure of our legacy case load. The fundamental cost structure of the Company has not changed and it is expected to improve as we move forward with server consolidation and implement future operating efficiencies," stated Gonzalo Troncoso, Executive Vice President and Chief Financial Officer. "Organic revenue and subscriber growth are ramping and we believe the Company is positioned to drive growth and increase shareholder value."

On March 7, 2007, Web.com's Board of Directors approved an amendment to its Shareholder Rights Plan to accelerate its expiration date from July 23, 2007 to today, March 13, 2007. The Company had adopted the Shareholder Rights Plan in July 2006 to protect its approximately $320 million in net operating loss carry-forwards (NOLs). Since that date, the composition of the Company's shareholders has changed so that there is less of a risk of a change in ownership that could jeopardize the NOLs under applicable tax laws.

Highlights of Full-Year 2006 Results:

  • Total revenues for the year were $49.1 million.
  • Net subscribers totaled approximately 155,000 at December 31, 2006, up over 18,000 or 13% from approximately 137,000 at the beginning of the year.
  • Net loss for the year was $13.8 million, or $(0.84) per share.
  • Adjusted net income from continuing operations(a) was negative $4.2 million. This includes the second quarter WebSource Media impairment of $3.5 million.

About Web.com

Web.com, Inc. (Nasdaq:WWWW) is a leading destination for the simplest, yet most powerful solutions for websites and web services. Web.com offers do-it-yourself and professional website building, website hosting, ecommerce, web marketing, professional website design and e-mail. Since 1995, Web.com has been helping individuals and small businesses leverage the power of the Internet to build a web presence. More than 4 million websites have been built using Web.com's proprietary tools, services and patented technology. The company's web hosting and website building services can also be found under the Interland (www.interland.com) and Trellix (www.trellix.com) brands. For more information on the company, please visit www.web.com or call at 1-800-WEB-HOST.

Web.com will host a conference call today to discuss its quarterly results at 9:30AM ET (6:30AM PT). A live webcast of the call can be accessed on the investors section of the company's website at www.web.com/ir. A replay of the call will be available on the site for seven days.

(a) Adjusted net income from continuing operations is a non-GAAP financial measure and is defined as net income from continuing operations excluding interest income or expense, provision for income taxes, depreciation, amortization of intangibles, and stock-based compensation.

Note Regarding Use of Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Attached to this earnings release is a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measures.

Web.com, Inc. uses the non-GAAP measure adjusted net income (loss) from continuing operations to supplement the Consolidated Financial Statements presented in accordance with GAAP. This non-GAAP financial measure is used in addition to and in conjunction with the financial results presented in accordance with GAAP, and the presentation of this non-GAAP financial information should not be considered in isolation, or as a substitute for the GAAP conforming measures.

Management uses adjusted net income (loss) from continuing operations for financial and operational decision making, to evaluate management performance for compensation purposes, and as a means to provide comparable period-to-period operating results. This information is generally requested by investors and analysts. Web.com, Inc. believes that providing this non-GAAP measure provides greater transparency to investors to view the business through the eyes of management. We define adjusted net income (loss) from continuing operations as net income (loss) from continuing operations excluding (i) provision for income taxes, (ii) interest income or expense, (iii) depreciation, (iv) amortization of intangibles, and (v) stock based compensation. Management uses this non-GAAP financial measure as a primary measure in monitoring and evaluating the Company's ongoing operating results and trends in its operations. The Company believes that excluding income (loss) from discontinued operations provides a more relevant measure of the Company's present web services business. The Company's income (loss) from discontinued operations relates to the Company's prior business of manufacturing personal computers, which the Company sold in fiscal 2001, and is wholly unrelated to the Company's present web services business. By excluding these discontinued operations, the Company believes management and investors are better able to compare operating results of the Company's existing business over multiple periods. Management believes the exclusion of stock based compensation provides a more consistent comparison against prior year periods, since stock based compensation was not included in net income (loss) for prior fiscal years. Management believes that measuring the performance of the business without regard to discontinued operations and interest, taxes and depreciation and amortization can make trends in operating results more readily apparent, and when considered with other information, assist management and investors in evaluating the Company's ability to generate future earnings. A substantial portion of the Company's non-cash charges relate to historical transactions and capital expenditures that the current management may or may not have influenced. When considered with other performance metrics that alternatively include or exclude these charges, the Company believes the investor, like management, has a measure that provides both individual and collective management effectiveness. The Company believes that this non-GAAP measure is beneficial to management and investors for planning, budgeting and financial modeling purposes, as well as for comparison to its historical performance from period to period and to competitors' operating results. We believe both short and long term performance is transparent by providing GAAP and non-GAAP basis measurements to investors and analysts.

The limitations of use of the non-GAAP measure of adjusted net income (loss) from continuing operations as compared to net income (loss) in accordance with GAAP include the fact that the measure excludes some recurring costs such as depreciation and amortization and stock-based compensation, which are expected to continue as a significant recurring expense in the Company's business. Adjusted net income (loss) from continuing operations also does not take into account costs of doing business that can be substantial, such as income taxes and interest expense. Further, adjusted net income (loss) from continuing operations may not be comparable to similarly captioned information reported by other companies. The Company compensates for these limitations by providing specific information regarding the GAAP amounts excluded from this non-GAAP measure, by providing reconciliation to the most directly comparable GAAP financial measure and by evaluating adjusted net income (loss) from continuing operations together with net income (loss) and other financial measures calculated in accordance with GAAP.

Forward-Looking Statements

Except for the historical information contained in this press release, statements in this press release may be considered forward-looking statements. These forward-looking statements include, but are not limited to, the ability to continue positive growth trends, increase customers and revenues, reduce expenses and enter into strategic alliances with leading companies in the industry. Forward-looking statements are also identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue", similar expressions, and variations or negatives of these words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements are based on Web.com's current expectations, estimates, projections, beliefs and assumptions. These forward-looking statements speak only as of the date hereof and are based upon the information available to the Company at this time. Such information is subject to change, and the Company will not necessarily inform you of such changes. These statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, the Company's actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors. Factors which could affect these forward-looking statements, and Web.com's business, include but are not limited to: the availability of competing products and services with superior quality, functionality or price, the ability to operate within budgeted expense, the ability of the Company to improve customer satisfaction, reduce churn, reduce expenses and expand its customer base as planned, growing dependence on reseller and other indirect sales channels, general economic conditions, the impact of competition, quarterly fluctuations in operating results, the loss of customers with failing businesses and customer churn in general, customer acceptance of new products and services, the retention of key employees, potential liabilities from the sale of dedicated server assets, possible disruptions for customers due to our data centers being maintained by third parties, higher than expected costs of litigation and the impact of liabilities that could carry over from the Company's discontinued operations. Certain of these and other risks associated with Web.com's business are discussed in more detail in its public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, its Quarterly Reports and Transition Report on Form 10-Q and its Current Reports on Form 8-K, and its most recent proxy statement. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update its forward-looking statements.

 WEB.COM, INC.
   CONSOLIDATED STATEMENT OF OPERATIONS
   (In thousands, except per share amounts)
   UNAUDITED
  
                                   For the Quarter Ended
                           -------------------------------------------
                                                                 2006
                           3/31/06  6/30/06  9/30/06  12/31/06   Total
                           -------------------------------------------
  
   Revenues                $12,262  $12,053  $12,348   $12,477 $49,140
  
   Operating costs and
    expenses:
    Network operating
     costs,exclusive of
     depreciation and
     amortization(a)         2,384    2,269    2,174     2,183   9,010
    Sales and marketing      3,150    3,335    3,600     3,969  14,054
    Technical support        1,722    1,761    1,701     1,627   6,811
    General and
     administrative          9,912    4,696    4,457     5,619  24,684
    Bad debt expense           277      242      314       301   1,134
    Depreciation and
     amortization            1,134    2,225    1,014     1,042   5,415
    Restructuring costs         43       23       --        --      66
    Impairment of
     investment in and
     advances to
     WebSource Media            --    3,488       --        --   3,488
    (Gain) on sale of
     accounts                   --       --      205      (219)    (14)
    Other expense (income),
     net                        (1)      (2)      (2)       --      (5)
                           -------  -------  -------  --------  ------
    Total operating costs
     and expenses           18,621   18,037   13,463    14,522  64,643
   Operating loss           (6,359)  (5,984)  (1,115)   (2,045)(15,503)
   Interest income
    (expense), net             261      248      227       246     982
                           -------  -------  -------  --------  ------
   Loss from continuing
    operations before
    income taxes            (6,098)  (5,736)    (888)   (1,799)(14,521)
   Income tax (benefit)
    expense                    854        9      411      (128)  1,146
                           -------  -------  -------  --------  ------
   Loss from continuing
    operations              (5,244)  (5,727)    (477)   (1,927)(13,375)
   Income (loss) from
    discontinued operations,
    net of tax                (259)      14     (117)      (93)   (455)
                           -------  -------  -------  --------  ------
   Net loss                $(5,503) $(5,713) $  (594) $ (2,020)$(13,830)
                           =======  =======  =======  ========  =======
   Net loss per share,
    basic and diluted:
    Continuing operations  $ (0.32) $ (0.35) $ (0.03) $  (0.12) $(0.81)
    Discontinued operations  (0.02)    0.00    (0.01)    (0.01)  (0.03)
                           -------  -------  -------  --------  ------
                           $ (0.34) $ (0.35) $ (0.04) $  (0.13) $(0.84)
                           =======  =======  =======  ========  ======
   Number of shares used in
    per share calculation:
        Basic and diluted   16,395   16,511   16,570    16,669  16,537
  
   (a) Excludes
       depreciation and
       amortization as
       follows
    Network operating
     costs                 $   813  $ 1,969  $   693  $    653  $ 4,129
                           =======  =======  =======  ========  =======
  
  
   WEB.COM, INC.
   ADJUSTED NET INCOME (LOSS)
   (In thousands)
   UNAUDITED
  
                                    For the Quarter Ended
                           --------------------------------------------
                                                                 2006
                           3/31/06  6/30/06  9/30/06  12/31/06   Total
                           --------------------------------------------
  
   Net loss                $(5,503) $(5,713) $  (594) $(2,020) $(13,830)
  
    Depreciation and
     amortization            1,134    2,225    1,014    1,042     5,415
    Interest expense
     (income)                 (261)    (248)    (227)    (246)     (982)
    Amortization of
     stock-based
     compensation            5,337      159      193      235     5,924
    Income tax (benefit)
     expense                  (854)      (9)    (411)     128    (1,146)
    Discontinued operations    259      (14)     117       93       455
                           -------  -------  -------  -------   -------
   Adjusted net income
    (loss) from continuing
    operations             $   112  $(3,600) $    92  $  (768)  $(4,164)
                           =======  =======  =======  =======   =======
   Key Metrics
  
    SAC (Subscriber
     Acquisition Cost)     $   103  $   108  $    89  $    88
    Subscribers (000)          149      148      152      155
    Churn                     (2.0%)   (2.3%)   (2.6%)   (2.9%)
    ARPU (Average Revenue
     Per User)             $ 26.78  $ 24.94  $ 24.78  $ 25.77
  
   SAC is calculated as the cost of advertising and marketing
   expenditures, divided by gross subscriber additions other than
   through acquisitions during the period.
  
   Churn is calculated as the number of subscribers cancelled during the
   period divided by the sum of the number of subscribers at the
   beginning of the period, divided by the number of months in the
   period.
  
   ARPU is calculated using the GAAP Hosting revenue for the period
   reported divided by the average number of subscribers for the year,
   divided by the number of months in the period.
  

CONTACT: Web.com, Inc.
Peter Delgrosso
404-260-2500
investor@corp.web.com