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Web.com Reports Second Quarter 2008 Financial Results

August 4, 2008

JACKSONVILLE, Fla., Aug 4, 2008 (PrimeNewswire via COMTEX News Network) -- Web.com (Nasdaq:WWWW), a leading provider of online marketing for small businesses, today announced results for the second quarter ended June 30, 2008.

Summary of Second Quarter 2008 Results:

  
     * Total revenue for the second quarter of 2008 was $32.0 million,
       an increase of 84% compared to $17.4 million for the second
       quarter of 2007.
  
     * Operating income, calculated in accordance with U.S. generally
       accepted accounting principles (GAAP), for the second quarter of
       2008 was $1.4 million, an increase from GAAP operating income
       of $0.5 million for the second quarter of 2007.
  
     * GAAP net income for the second quarter of 2008 was $2.2 million,
       an increase from GAAP net income of $0.6 million for the second
       quarter of 2007. GAAP net income per diluted share was $0.07 per
       share for the second quarter of 2008 an increase from GAAP net
       income per diluted share of $0.03 per share for the second quarter
       of 2007. GAAP net income for the second quarter of 2008 included
       a $0.6 million net tax benefit, or $0.02 per diluted share,
       resulting from a $1.3 million reduction in the Company's deferred
       tax asset valuation reserve.
  
     * Non-GAAP operating income for the second quarter of 2008 was a
       record $5.2 million, representing a non-GAAP operating margin of
       16% and an increase of 167% compared to $2.0 million for the
       second quarter of 2007.
  
     * Non-GAAP net income for the second quarter of 2008 was a
       record $5.4 million, an increase of 121% compared to $2.4 million
       for the second quarter of 2007.
  
     * Non-GAAP net income per diluted share for the second quarter of
       2008 was $0.18, an increase of 50% compared to $0.12 for the
       second quarter of 2007.
  
  

"Despite challenging economic conditions, Web.com was able to hit the top of its quarterly revenue and earnings guidance. The operating leverage potential of our business model is evidenced by record gross and operating margins, which is driving the company's strong and growing earnings and cash flow," stated David Brown, Chairman and CEO of Web.com. "From a short-term perspective, we believe it is prudent to expect the macro-economic environment to impact our small business customers. From a long-term perspective, we are very optimistic about our market position and opportunity as we execute against our strategies to build the premier online marketing solutions provider to small and medium-sized businesses."

Other Highlights:

  
     * Web.com's total net subscribers were approximately 271,000 at
       the end of the second quarter, up from approximately 270,000
       at the end of the previous quarter.
  
     * Customer churn was at a record low 3.9%, compared to 4.1% in the
       previous quarter on a combined basis.
  
  

Conference Call Information

Management will host a conference call to discuss Web.com's results and other matters related to the Company's business, including guidance related to future results, today August 4, 2008, at 5:00 p.m. (Eastern Time). To access this call, dial 888-668-1645 (domestic) or 913-312-0392 (international). A replay of this conference call will be available for a limited time at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 6601479. A webcast of this conference call will also be available for a limited time on the "Investor Relations" page of the Company's website, www.web.com.

All per share numbers for non-GAAP net income per share are expressed on a weighted-average diluted per share basis. Non-GAAP net income exclude stock-based compensation expense, amortization expense related to acquisitions, the deferred revenue adjustment due to purchase accounting, income tax expense, and includes an estimated cash tax rate to be paid during 2008. Non-GAAP operating income excludes stock-based compensation expense, amortization expense related to acquisitions and the deferred revenue adjustment related to purchase accounting. A reconciliation of GAAP financial measures to non-GAAP financial measures results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Use of Non-GAAP Financial Measures."

About Web.com

Web.com (Nasdaq:WWWW) is a leading provider of online marketing for small businesses. Web.com offers a full range of online services, including Internet marketing and advertising, local search, search engine marketing, search engine optimization, lead generation, home contractor specific leads, website design and publishing, and shopping cart solutions, meeting the needs of small businesses anywhere along their lifecycle. Web.com is currently incorporated in Delaware as Website Pros, Inc. and is doing business as Web.com. For more information on the company, please visit http://www.web.com or call 1-800-GETSITE.

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 and helps investors gauge the company's ability to generate cash flow, 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 Operating Income. The Company excludes from non-GAAP
       operating income amortization of intangibles, fair value
       adjustment to deferred revenue and stock based compensation
       charges. Management believes that excluding these non-cash
       charges 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 Share. The
       Company excludes from non-GAAP net income and non-GAAP net
       income per share amortization of intangibles, income tax
       expense, fair value adjustment to deferred revenue and 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.
  
  

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
       SFAS 123(R). The Company excludes stock-based compensation
       expenses from our non-GAAP measures primarily because they
       are non-cash expenses. Prior to the adoption of SFAS 123(R)
       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 by
       SFAS 123, to disclose such expenses in the footnotes to its
       financial statements. As the Company applies SFAS 123(R), it
       believes that it is useful to its investors to understand the
       impact of the application of SFAS 123(R) 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 SFAS 123(R) 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 SFAS 141. 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, liquidity and its ability
       to invest in research and development and fund acquisitions
       and capital expenditures. 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.
  
     * 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.
  
     * Fair value adjustment to deferred revenue. The Company has
       recorded a fair value adjustment to acquired deferred revenue
       in accordance with SFAS 141. 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 therefore
       facilitates management's internal comparisons to the Company's
       historical operating results.
  
  

This press release includes certain "forward-looking statements" including, without limitation, statements regarding Web.com's expectations about its future performance, 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" and "optimistic" 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 our 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, our ability to integrate the Website Pros and Web.com businesses, our ability to maintain our sales efficiency, our ability to maintain our existing, and develop new, strategic relationships, the number of our net subscriber additions and our monthly customer turnover. These and 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 March 31, 2008, 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.

  
                             Website Pros, Inc.
                   Consolidated Statements of Operations
                   (in thousands except per share data)
  
                                Three Months Ended     Six Months Ended
                                     June 30,              June 30,
                                 2008        2007       2008      2007
                             (unaudited)(unaudited)(unaudited)(unaudited)
                               --------   --------   --------   --------
   Revenue:
     Subscription              $ 30,269   $ 16,049   $ 60,000   $ 31,187
     License                      1,119        684      1,568      1,712
     Professional services          589        668      1,271        926
                               --------   --------   --------   --------
        Total revenue            31,977     17,401     62,839     33,825
  
   Cost of revenue (excluding
    depreciation and amortization
     shown separately below):
     Subscription (a)            11,038      7,286     21,941     14,101
     License                        191        179        284        477
     Professional services          292        299        667        600
                               --------   --------   --------   --------
        Total cost of
         revenue                 11,521      7,764     22,892     15,178
                               --------   --------   --------   --------
  
   Gross profit                  20,456      9,637     39,947     18,647
  
   Operating expenses:
     Sales and marketing
      (a)                         7,606      4,265     15,069      8,212
     Research and
      development (a)             2,793        944      5,431      1,722
     General and adminis-
      trative (a)                 5,398      3,169     10,500      6,077
     Depreciation and
      amortization                3,232        714      6,582      1,395
                               --------   --------   --------   --------
        Total operating
         expenses                19,029      9,092     37,582     17,406
                               --------   --------   --------   --------
   Income from operations         1,427        545      2,365      1,241
  
   Other income:
     Interest, net                  192        510        448      1,011
                               --------   --------   --------   --------
   Income before income
    taxes                         1,619      1,055      2,813      2,252
   Income tax benefit
    (expense)                       578       (504)       (66)    (1,070)
                               --------   --------   --------   --------
   Net income                  $  2,197   $    551   $  2,747   $  1,182
                               ========   ========   ========   ========
  
   Net income per common
    share
   Basic                       $   0.08   $   0.03   $   0.10   $   0.07
                               ========   ========   ========   ========
   Diluted                     $   0.07   $   0.03   $   0.09   $   0.06
                               ========   ========   ========   ========
   Weighted-average number
    of shares used in per
    share amounts:
   Basic                         27,806     17,475     27,678     17,407
                               ========   ========   ========   ========
   Diluted                       30,546     19,705     30,562     19,684
                               ========   ========   ========   ========
  
   (a) Stock based compensation
    included above:
     Subscription (cost of
      revenue)                 $     83   $     69   $    163   $    111
     Sales and marketing            229        224        440        333
     Research and devel-
      opment                        114         81        216        140
     General and adminis-
      tration                       812        518      1,350      1,100
                               --------   --------   --------   --------
   Total                       $  1,238   $    892   $  2,169   $  1,684
                               ========   ========   ========   ========
  
  
  
                             Website Pros, Inc.
                        Consolidated Balance Sheets
                   (in thousands except per share data)
  
                                        June 30, 2008   December 31, 2007
                                         (unaudited)       (audited)
                                        -------------   -----------------
   Assets
   Current assets:
     Cash and cash equivalents             $  31,283       $  29,746
     Restricted investments                      499           4,805
     Accounts receivable, net of allowance
      $687 and $791 thousand, respectively     7,266           6,204
     Inventories, net of reserves of
      $67 and $67, respectively                   75              26
     Prepaid expenses                          1,255           4,248
     Prepaid marketing fees                      783             793
     Deferred taxes                            1,818           1,723
     Other current assets                        714             759
                                           ---------       ---------
   Total current assets                       43,693          48,304
  
   Restricted investments                        305           1,675
   Property and equipment, net                 8,862           7,153
   Goodwill                                  110,870         107,933
   Intangible assets, net                     66,391          69,422
   Other assets                                  250             526
                                           ---------       ---------
   Total assets                            $ 230,371       $ 235,013
                                           =========       =========
  
   Liabilities and stockholders' equity
   Current liabilities:
     Accounts payable                      $   2,347       $   2,034
     Accrued expenses                          7,541           9,097
     Accrued restructuring costs
      and other reserves                       3,301          10,484
     Deferred revenue                          8,552           8,501
     Accrued marketing fees                      274             279
     Notes payable, current                      116           1,186
     Obligations under capital
      lease, current                              --               1
     Other liabilities                           148             197
                                           ---------       ---------
   Total current liabilities                  22,279          31,779
  
   Accrued rent expense                           93             105
   Deferred revenue                              148             147
   Notes payable, long term                       --              59
   Accrued restructuring costs and
    other reserves, long term                  2,305           3,116
   Deferred tax liabilities, long term         3,351           3,351
   Other long term liabilities                    78              25
                                           ---------       ---------
   Total liabilities                          28,254          38,582
  
  
   Stockholders' equity
  
   Common stock, $0.001 par value;
    150,000,000 shares authorized;
    27,954,354 shares and 27,472,686
    shares issued and outstanding at
    June 30, 2008 and December 31,
    2007, respectively.                           28              27
   Additional paid-in capital                257,146         254,208
   Accumulated deficit                       (55,057)        (57,804)
                                           ---------       ---------
   Total stockholders' equity                202,117         196,431
                                           ---------       ---------
  
   Total liabilities and stockholders'
    equity                                 $ 230,371       $ 235,013
                                           =========       =========
  
  
                             Website Pros, Inc.
                  Reconciliation of GAAP to Non-GAAP Results
                    (in thousands except per share data)
                               (unaudited)
  
                                  Three Months Ended   Six Months Ended
                                       June 30,            June 30,
                                   2008      2007      2008      2007
                                 --------  --------  --------  --------
   Reconciliation of GAAP
    revenue to non-GAAP revenue
   GAAP revenue                  $ 31,977  $ 17,401  $ 62,839  $ 33,825
   Fair value adjustment
    to deferred revenue                85        73       224        73
                                 --------  --------  --------  --------
   Non-GAAP revenue              $ 32,062  $ 17,474  $ 63,063  $ 33,898
                                 ========  ========  ========  ========
  
   Reconciliation of GAAP
    net income (loss)
    attributable to common
    stockholders to non-
    GAAP net income
   GAAP Net income (loss)        $  2,197  $    551  $  2,747  $  1,182
   Amortization of intan-
    gibles                          2,495       452     5,113       874
   Income tax (benefit)
    expense                          (578)      504        66     1,070
   Cash income tax expense            (26)      (27)      (85)      (54)
   Fair value adjustment
    to deferred revenue                85        73       224        73
   Stock based compensation         1,238       892     2,169     1,684
                                 --------  --------  --------  --------
   Non-GAAP net income           $  5,411  $  2,445  $ 10,234  $  4,829
                                 ========  ========  ========  ========
  
   Reconciliation of GAAP
    basic net income (loss)
    per share to non-GAAP
    net income per share
  
   Basic GAAP net income
    (loss) per share             $   0.08  $   0.03  $   0.10  $   0.07
   Amortization of intangibles
    per share                        0.09      0.03      0.18      0.05
   Income tax expense per share     (0.02)     0.03      0.00      0.06
   Cash income tax expense per
    share                           (0.00)    (0.00)    (0.00)    (0.00)
   Fair value adjustment to
    deferred revenue per share       0.00      0.00      0.01      0.00
   Stock based compensation per
    share                            0.04      0.05      0.08      0.10
                                 --------  --------  --------  --------
   Basic Non-GAAP net income
    per share                    $   0.19  $   0.14  $   0.37  $   0.28
                                 ========  ========  ========  ========
  
   Reconciliation of GAAP
    diluted net income (loss)
    per share to non-GAAP net
    income per share
  
   Fully diluted shares:
   Common stock                    27,806    17,475    27,678    17,407
   Diluted stock options            2,412     1,761     2,550     1,808
   Warrants                           189       192       195       192
   Escrow shares                      139       277       139       277
                                 --------  --------  --------  --------
       Total                       30,546    19,705    30,562    19,684
                                 ========  ========  ========  ========
  
   Diluted GAAP net income
    (loss) per share             $   0.07  $   0.03  $   0.09  $   0.06
   Amortization of intangibles
    per share                        0.08      0.02      0.16      0.05
   Income tax expense per share     (0.02)     0.03      0.00      0.05
   Cash income tax expense per
    share                           (0.00)    (0.00)    (0.00)    (0.00)
   Fair value adjustment to
    deferred revenue per share       0.00      0.00      0.01      0.00
   Stock based compensation per
    share                            0.05      0.04      0.07      0.09
                                 --------  --------  --------  --------
   Diluted Non-GAAP net income
    per share                    $   0.18  $   0.12  $   0.33  $   0.25
                                 ========  ========  ========  ========
  
   Reconciliation of GAAP
   operating income (loss) to
    non-GAAP operating income
  
   GAAP operating income (loss)  $  1,427  $    545  $  2,365  $  1,241
   Amortization of intangibles      2,495       452     5,113       874
   Fair value adjustment to
    deferred revenue                   85        73       224        73
   Stock based compensation         1,238       892     2,169     1,684
                                 --------  --------  --------  --------
   Non-GAAP operating income     $  5,245  $  1,962  $  9,871  $  3,872
                                 ========  ========  ========  ========
  
   Reconciliation of GAAP
    operating margin to non-
    GAAP operating margin
   GAAP operating margin               4%        3%        4%        4%
   Amortization of intangibles         8%        3%        8%        3%
   Fair value adjustment to
    deferred revenue                   0%        0%        1%        0%
   Stock based compensation            4%        5%        3%        4%
                                 --------  --------  --------  --------
   Non-GAAP operating margin          16%       11%       16%       11%
                                 ========  ========  ========  ========
  
  
                             Website Pros, Inc.
                    Consolidated Statement of Cash Flows
                             (in thousands)
  
                                               Six Months Ended June 30,
                                                 2008             2007
                                              (unaudited)     (unaudited)
                                             -----------      ----------
   Cash flows from operating activities
  
   Net income                                  $  2,747         $  1,182
   Adjustments to reconcile net income
    to net cash (used in) provided by
    operating activities:
   Depreciation and amortization                  6,582            1,395
   Loss on disposal of assets                        (1)              --
   Stock-based compensation expense               2,169            1,684
   Deferred income tax                              (95)             950
   Changes in operating assets and
    liabilities:
     Accounts receivable                         (1,007)            (143)
     Inventories                                    (49)              43
     Prepaid expenses and other assets            3,350              (97)
     Accounts payable, accrued expenses
      and other liabilities                      (9,757)            (875)
     Deferred revenue                                51              420
                                               --------         --------
   Net cash provided by operating
    activities                                    3,990            4,559
  
   Cash flows from investing activities
  
   Business acquisition, net of cash
    received                                     (4,578)          (2,811)
   Proceeds from sale of investment               7,000               --
   Purchase of investment                        (2,494)              --
   Change in restricted investments               1,228               --
   Purchase of property and equipment            (3,247)            (615)
   Investment in intangible assets                   (2)            (100)
                                               --------         --------
   Net cash used in investing activities         (2,093)          (3,526)
  
   Cash flows from financing activities
  
   Stock issuance costs                             (10)              --
   Payment of debt obligations                   (1,130)            (136)
   Proceeds from exercise of stock options          780            1,197
                                               --------         --------
   Net cash (used in) provided by financing
    activities                                     (360)           1,061
                                               --------         --------
  
   Net increase in cash and cash equivalents      1,537            2,094
   Cash and cash equivalents, beginning of
    period                                       29,746           42,155
                                               --------         --------
   Cash and cash equivalents, end of period    $ 31,283         $ 44,249
                                               --------         --------
  
   Supplemental cash flow information:
       Interest paid                           $     22         $      9
                                               ========         ========
       Income tax paid                         $    123         $     80
                                               ========         ========
  
  

This news release was distributed by PrimeNewswire, www.primenewswire.com

SOURCE: Web.com

Web.com 
            Peter Delgrosso
            904-680-6696
            pdelgrosso@web.com
  

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