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Web.com Reports Second Quarter 2017 Financial Results

August 3, 2017

  • Strong performance exceeded revenue and profitability guidance
  • Generated $43.8 million of operating cash flow up from $30.8 million in the prior year
  • Reduced debt by $31.8 million

JACKSONVILLE, Fla., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (NASDAQ:WEB), a leading global provider of a full range of Internet services and online marketing solutions for small businesses, today announced results for the second quarter ended June 30, 2017.   

"Web.com reported second quarter financial results that beat our revenue and profitability targets.  We achieved our goal of returning to sequential revenue growth driven by solid performance across all three areas of our business.  The Company also delivered strong adjusted EBITDA and increasing free cash flow that we continue to deploy to drive shareholder value," said David L. Brown, chairman, chief executive officer and president of Web.com.

Brown added, "During the quarter, Web.com made meaningful progress towards our strategic initiatives for the year that will position us for improving growth and profitability.  Web Brand Networks, our franchise and multi-location channel, and our vertical market solutions, including TORCHx and Lighthouse 360, are showing good results and we continue to improve our go-to-market efforts in Premium Services, our suite of high end marketing solutions.  We are confident that as we further execute on our strategy that we will achieve our long term growth and profitability targets."

Summary of Second Quarter 2017 Financial Results:

  • Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $186.7 million for the second quarter of 2017, compared to $187.8 million for the second quarter of 2016. Non-GAAP revenue was $188.1 million for the second quarter of 2017, compared to $193.9 million in the year-ago quarter.  
     
  • GAAP operating income was $23.0 million for the second quarter of 2017, representing a 12% GAAP operating margin, compared to $7.6 million, representing a 4% GAAP operating margin, for the second quarter of 2016.  Non-GAAP operating income was $42.9 million for the second quarter of 2017, representing a 23% non-GAAP operating margin, compared to $37.3 million for the second quarter of 2016, representing a 19% non-GAAP operating margin.
     
  • GAAP net income was $8.0 million, or $0.16 per diluted share, for the second quarter of 2017, representing a 4% GAAP net income margin.  GAAP net loss was $1.6 million, or $0.03 per diluted share, for the second quarter of 2016, representing a -1% GAAP net loss margin.
     
  • Adjusted EBITDA was $48.2 million for the second quarter of 2017, representing an adjusted EBITDA margin of 26%, surpassing the high end of the Company's adjusted EBITDA guidance of $46.0 to $48.0 million.  The Company had adjusted EBITDA of $42.7 million for the second quarter of 2016, representing a 22% adjusted EBITDA margin. 
     
  • The Company generated cash from operations of $43.8 million for the second quarter of 2017, compared to $30.8 million of cash flow from operations for the second quarter of 2016.

Second Quarter and Recent Business Highlights:

  • Web.com's total net subscribers were approximately 3,490,000 at the end of the second quarter of 2017, declining approximately 12,000 from the end of the first quarter of 2017.
     
  • Web.com's average revenue per user (ARPU) was $17.72 for the second quarter of 2017 compared to $18.66 for the second quarter of 2016.  ARPU increased sequentially during the second quarter of 2017 from $17.67 during the first quarter of 2017.
     
  • Web.com's trailing twelve month customer retention rate was 84.4% for the second quarter of 2017.
     
  • Web.com reduced debt by $31.8 million in the second quarter of 2017.
     
  • Launched Fill-in, a product enhancement to our dental vertical Lighthouse 360.  Fill-in is the first and only solution that detects last minute cancellations and finds a patient to take the opening, improving the profitability of our dental customers.

Conference Call Information
Management will host a conference call today, August 3, 2017, at 5:00 p.m. ET, to discuss Web.com's second 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 888-280-4443 (domestic) or 719-457-2634 (international). A replay of this conference call will be available until August 17, 2017, at 844-512-2921 (domestic) or 412-317-6671 (international). The replay conference ID is 7772558.

About Web.com
Web.com Group, Inc. (Nasdaq:WEB) is a global provider of 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, eCommerce solutions and call center services. 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, 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:

  • Non-GAAP Revenue. Web.com excludes from non-GAAP revenue the impact of the fair value adjustment to amortized deferred revenue because management believes that excluding such measures helps management and investors better understand the Company's revenue trends.

  • Non-GAAP Operating Income and Non-GAAP Operating Margin. Web.com excludes from non-GAAP operating income and non-GAAP operating margin, amortization of intangibles, asset impairment,  stock-based compensation charges, restructuring expenses, corporate development expenses and fair value adjustment to deferred revenue and deferred expense because management believes that adjusting for such measures helps management and investors better understand the Company's operating activities.

  • Adjusted EBITDA and Adjusted EBITDA Margin. Web.com excludes from adjusted EBITDA and adjusted EBITDA margin depreciation and amortization expense, asset impairment, income tax provision, interest expense, interest income, stock-based compensation, fair value adjustments to deferred revenue and deferred expense, corporate development expenses and restructuring expenses, because management believes that excluding such items helps investors better understand the Company's operating activities.

  • Non-GAAP Cost of Revenue (excluding depreciation and amortization). Web.com excludes from non-GAAP cost of revenue (excluding depreciation and amortization) the fair value adjustment to deferred expense and stock based compensation charges because management believes that adjusting for such measures helps management and investors better understand the company's operating activities.

  • Free Cash Flow. Free cash flow is a non-GAAP financial measure that Web.com uses and defines as net cash provided by operating activities less capital expenditures. The Company considers free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for investment opportunities.

  • Non-GAAP diluted weighted average common shares. Non-GAAP diluted weighted average shares outstanding include dilutive common share equivalents outstanding that were excluded from GAAP diluted weighted average shares outstanding in periods of a GAAP net loss, as these shares are excluded when calculating GAAP diluted weighted average common shares because including them would be anti-dilutive. Management believes that making these adjustments helps management and investors better understand the potential dilution to shareholders.

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 awards under Accounting Standards Codification ("ASC") 718-10. 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 such expense is not used by management to assess the core profitability of the Company's business operations. Web.com further believes these measures are useful to investors in that they allow for greater transparency to certain line items in the Company's financial statements. In addition, when management performs internal comparisons to Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.

  • Amortization of intangibles. Web.com incurs amortization of acquired intangibles under ASC 805-10-65. Acquired intangibles primarily consist of customer relationships, customer lists, non-compete agreements, trade names, and developed technology. Web.com 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, the Company believes the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, when management performs internal comparisons to Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.

  • Depreciation expense. Web.com records depreciation expense associated with its fixed assets. Although its fixed assets generate revenue for Web.com, the item is excluded because management believes certain non-GAAP financial measures excluding this item provide meaningful supplemental information regarding the Company's operational performance. In addition, when management performs internal comparisons to Web.com's historical operating results and compares the Company's operating results to the Company's competitors, management excludes this item from various non-GAAP measures.

  • Restructuring expense. Web.com has recorded restructuring expenses and 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.

  • Fair value adjustment to deferred revenue and deferred expense. Web.com has recorded a fair value adjustment to acquired deferred revenue and deferred expense in accordance with ASC 805-10-65. Web.com excludes the impact of these adjustments 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 deferred expense therefore facilitates management's internal comparisons to Web.com's historical operating results.

  • Corporate development expenses. Web.com incurred expenses relating to acquisitions and the successful integration of acquisitions. Web.com 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.

  • Gains or losses from asset sales or impairment and certain other transactions. Web.com excludes the impact of asset sales or impairment and certain other transactions including debt extinguishments and the sale of equity method investment from its non-GAAP measures because the impact of these items is not considered part of the company's ongoing operations.

  • Monthly average revenue per user, or ARPU. ARPU is a metric the Company measures on a quarterly basis. The Company defines ARPU as quarterly non-GAAP subscription revenue divided by the average of the number of subscribers at the beginning of the quarter and the number of subscribers at the end of the quarter, divided by three months. The Company excludes from subscription revenue the impact of the fair value adjustments to deferred revenue resulting from acquisition-related write downs.

Forward-Looking Statements
This press release includes "forward-looking statements" including, without limitation, the statement regarding Web.com's confidence in its strategy achieving long term growth and profitability targets, 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.  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, 2016 and Form 10-Q for the quarter ended March 31, 2017, 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 Statements of Comprehensive Income
(in thousands, except for per share data)
(unaudited)
 
  Three months ended June 30,   Six months ended June 30,
  2017   2016 (1)   2017   2016 (1)
               
Revenue $ 186,731     $ 187,818     $ 371,850     $ 332,616  
               
Cost of Revenue and Operating Expenses:              
Cost of revenue (excluding depreciation and amortization)                       58,527     58,758     116,450     108,809  
Sales and marketing 49,230     60,135     100,141     102,562  
Technology and development 17,323       19,732     34,324     32,358  
General and administrative 21,252     18,564       41,108       35,296  
Restructuring expense     778     312     914  
Asset Impairment         143      
Depreciation and amortization 17,401     22,273     35,834     38,186  
Total cost of revenue and operating expenses 163,733     180,240     328,312     318,125  
Income from operations 22,998     7,578     43,538     14,491  
               
Interest expense, net (8,146 )   (8,662 )   (16,036 )   (14,259 )
Net income (loss) before income taxes 14,852     (1,084 )   27,502     232  
Income tax expense (6,806 )   (522 )   (12,940 )   (1,500 )
Net income (loss) $ 8,046     $ (1,606 )   $ 14,562     $ (1,268 )
               
Other comprehensive income:              
Foreign currency translation adjustments (624 )   (891 )   (25 )   (1,207 )
Unrealized gain on investments, net of tax         1     28  
Total comprehensive income (loss) $ 7,422     $ (2,497 )   $ 14,538     $ (2,447 )
               
Basic earnings (loss) per share:              
Net income (loss) per basic common share $ 0.16     $ (0.03 )   $ 0.30     $ (0.03 )
Diluted earnings (loss) per share:              
Net income (loss) per diluted common share $ 0.16     $ (0.03 )   $ 0.29     $ (0.03 )
               
 
(1) Included in the three and six months ended June 30, 2016 are adjustments for the correction of an immaterial error in the
classification of infrastructure costs, which were previously classified within cost of revenue and were reclassified to
technology and development. In addition, the Company changed its accounting classification to record infrastructure costs
supporting administrative platforms to be included in general and administrative expense. These were previously recorded in
technology and development expense.


Web.com Group, Inc.  
Consolidated Balance Sheets  
(in thousands, except share amounts)  
           
    June 30, 2017   December 31, 2016  
Assets   (unaudited)        
           
Current assets:          
Cash and cash equivalents   $ 33,449     $ 20,447    
Accounts receivable, net of allowance of $1,631 and $1,695,
respectively
  20,285     20,567    
Prepaid expenses   13,538     12,311    
Deferred expenses   63,178     60,217    
Other current assets   1,868     1,872    
Total current assets   132,318     115,414    
           
Property and equipment, net   55,248     53,132    
Deferred expenses   48,417     49,127    
Goodwill   881,590     871,751    
Intangible assets, net   392,359     413,127    
Other assets   21,011     11,282    
Total assets   $ 1,530,943     $ 1,513,833    
           
Liabilities and stockholders' equity          
Current liabilities:          
Accounts payable   $ 20,243     $ 19,619    
Accrued expenses   14,001     14,475    
Accrued compensation and benefits   15,074     18,307    
Deferred revenue   240,675     230,206    
Current portion of debt   4,765     16,847    
Deferred consideration   22,902     20,244    
Other liabilities   4,236     5,034    
Total current liabilities   321,896     324,732    
           
Deferred revenue   193,661     195,859    
Long-term debt   640,202     647,294    
Deferred tax liabilities   64,567     80,135    
Other long-term liabilities   17,625     30,361    
Total liabilities   1,237,951     1,278,381    
Stockholders' equity:          
Common stock, $0.001 par value per share: 150,000,000 shares
authorized, 51,435,214 and 50,278,137 shares issued and outstanding
at June 30, 2017 and December 31, 2016, respectively
  51     50    
Additional paid-in capital   579,083     578,486    
Treasury stock at cost, 1,723,706 shares as of June 30, 2017 and
3,146,012 shares as of December 31, 2016
  (48,035 )   (62,430 )  
Accumulated other comprehensive loss   (4,044 )   (4,020 )  
Accumulated deficit (1)   (234,063 )   (276,634 )  
Total stockholders' equity   292,992     235,452    
Total liabilities and stockholders' equity   $ 1,530,943     $ 1,513,833    
(1) The Company adopted Accounting Standards Update ("ASU") 2016-09 on January 1, 2017 using the modified retrospective
transition method and recorded a $28.0 million adjustment for previously unrecognized excess tax benefits in opening accumulated
deficit on January 1, 2017.
 


Web.com Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
       
  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Cash flows from operating activities              
Net income (loss) 8,046     $ (1,606 )   $ 14,562     $ (1,268 )
Adjustments to reconcile net income to net cash provided
by operating activities:
             
Depreciation and amortization 17,401     22,273     35,834     38,186  
Stock based compensation 6,102     5,392     11,659     10,200  
Deferred income taxes 5,502     (214 )   11,176     599  
Amortization of debt issuance costs and other 3,702     3,687     7,399     6,685  
Asset impairment         143      
Changes in operating assets and liabilities:              
Accounts receivable, net (1,999 )   (512 )   986     (1,758 )
Prepaid expenses and other assets 1,652     80     (5,216 )   (10,935 )
Deferred expenses 159     362     (1,535 )   (2,586 )
Accounts payable 5,987     5,173     (169 )   (1,585 )
Accrued expenses and other liabilities (2,236 )   (6,713 )   347     (519 )
Accrued compensation and benefits 1,614     1,105     (3,672 )   (7,375 )
Deferred revenue (2,152 )   1,786     5,452     15,644  
Net cash provided by operating activities 43,778     30,813     76,966     45,288  
               
Cash flows from investing activities              
Business acquisitions     (2,975 )   (8,587 )   (303,262 )
Capital expenditures (5,394 )   (4,451 )   (10,573 )   (8,306 )
Other     (1,300 )       (1,300 )
Net cash used in investing activities (5,394 )   (8,726 )   (19,160 )   (312,868 )
               
Cash flows from financing activities              
Stock issuance costs (1 )   (1 )   (4 )   (6 )
Common stock repurchased (199 )   (27 )   (3,559 )   (3,233 )
Payments of long-term debt (25,516 )   (2,437 )   (27,954 )   (4,937 )
Payments on revolving credit facility (56,313 )   (17,563 )   (56,313 )   (27,563 )
Proceeds from exercise of stock options 4,563     666     8,979     1,205  
Deferred consideration payment         (18,933 )    
Proceeds from borrowings on long-term debt 50,000         50,000     200,000  
Proceeds from borrowings on revolving credit facility         7,000     115,000  
Debt issuance costs (1,927 )       (1,927 )   (5,700 )
Common stock purchases under stock repurchase plan     (5,744 )   (2,081 )   (16,909 )
Net cash (used in) provided by financing activities (29,393 )   (25,106 )   (44,792 )   257,857  
               
Effect of exchange rate changes on cash (10 )   (22 )   (12 )   (33 )
                     
Net increase (decrease) in cash and cash equivalents 8,981     (3,041 )   13,002     (9,756 )
Cash and cash equivalents, beginning of period 24,468     11,991     20,447     18,706  
Cash and cash equivalents, end of period $ 33,449     $ 8,950     $ 33,449     $ 8,950  
               
Supplemental cash flow information              
Interest paid $ 3,851     $ 4,529     $ 8,812     $ 6,851  
Income taxes paid $ 1,212     $ 632     $ 1,573     $ 2,046  


Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
       
  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Reconciliation of GAAP revenue to non-GAAP
revenue
             
GAAP revenue $ 186,731     $ 187,818     $ 371,850     $ 332,616  
Fair value adjustment to deferred revenue 1,328     6,038     3,038     14,596  
Non-GAAP revenue $ 188,059     $ 193,856     $ 374,888     $ 347,212  
               
Reconciliation of GAAP operating income to
non-GAAP operating income
             
GAAP operating income $ 22,998     $ 7,578     $ 43,538     $ 14,491  
Amortization of intangibles 12,085     16,844     24,964     28,148  
Asset impairment         143      
Stock based compensation 6,102     5,392     11,659     10,200  
Restructuring expense     778     312     914  
Corporate development 340     529     767     3,868  
Fair value adjustment to deferred revenue 1,328     6,038     3,038     14,596  
Fair value adjustment to deferred expense 46     94     104     152  
Non-GAAP operating income $ 42,899     $ 37,253     $ 84,525     $ 72,369  
               
Reconciliation of GAAP operating margin to
non-GAAP operating margin
             
GAAP operating margin 12 %   4 %   12 %   4 %
Amortization of intangibles 6     9     7     8  
Asset impairment              
Stock based compensation 3     3     3     3  
Restructuring expense              
Corporate development 1             2  
Fair value adjustment to deferred revenue 1     3     1     4  
Fair value adjustment to deferred expense              
Non-GAAP operating margin 23 %   19 %   23 %   21 %
               
       
Reconciliation of GAAP net income (loss) to
adjusted EBITDA
             
GAAP net income (loss) $ 8,046     $ (1,606 )   $ 14,562     $ (1,268 )
Depreciation and amortization 17,401     22,273     35,834     38,186  
Asset impairment         143      
Stock based compensation 6,102     5,392     11,659     10,200  
Restructuring expense     778     312     914  
Corporate development 340     529     767     3,868  
Fair value adjustment to deferred revenue 1,328     6,038     3,038     14,596  
Fair value adjustment to deferred expense 46     94     104     152  
Interest expense, net 8,146     8,662     16,036     14,259  
Income tax expense 6,806     522     12,940     1,500  
Adjusted EBITDA $ 48,215     $ 42,682     $ 95,395     $ 82,407  
               
Reconciliation of GAAP net income (loss)
margin to adjusted EBITDA margin
             
GAAP net income (loss) margin 4 %   (1 )%   4 %   %
Depreciation and amortization 8     12     10     11  
Asset impairment              
Stock based compensation 3     3     3     3  
Restructuring expense              
Corporate development 1             2  
Fair value adjustment to deferred revenue 1     3     1     4  
Fair value adjustment to deferred expense              
Interest expense, net 5     5     4     4  
Income tax expense 4         3      
Adjusted EBITDA margin 26 %   22 %   25 %   24 %
               
               
Reconciliation of net cash provided by operating
activities to free cash flow
             
Net cash provided by operating activities $ 43,778     $ 30,813     $ 76,966     $ 45,288  
Capital expenditures (5,394 )   (4,451 )   (10,573 )   (8,306 )
Free cash flow $ 38,384     $ 26,362     $ 66,393     $ 36,982  
               
Net cash used in investing activities $ (5,394 )   $ (8,726 )   $ (19,160 )   $ (312,868 )
Net cash (used in) provided by financing activities                               $ (29,393 )   $ (25,106 )   $ (44,792 )   $ 257,857  
               
Reconciliation of GAAP cost of revenue
(excluding depreciation and amortization) to
non-GAAP cost of revenue (excluding
depreciation and amortization)
             
Cost of revenue (excluding depreciation and
amortization)
$ 58,527     $ 58,758     $ 116,450     $ 108,809  
Less:  Fair value adjustment to deferred expenses (46 )   (94 )   (104 )   (152 )
Less:  Stock based compensation (281 )   (268 )   (550 )   (763 )
Non-GAAP cost of revenue (excluding
depreciation and amortization)      
$ 58,200     $ 58,396     $ 115,796     $ 107,894  
               
Reconciliation of GAAP diluted weighted
average common shares to non-GAAP diluted
weighted average common shares
             
Diluted shares:              
Basic weighted average common shares 49,488     49,293     49,283     49,334  
Diluted stock options 1,352         1,322      
Diluted performance shares         6      
Diluted restricted stock 346         456      
GAAP diluted weighted-average shares used to
compute net income/(loss) per share attributable to
common stockholders
51,186     49,293     51,067     49,334  
Diluted stock options     1,383         1,384  
Diluted restricted stock     210         318  
Non-GAAP diluted weighted average common
shares
51,186     50,886     51,067     51,036  
               
Reconciliation of GAAP revenue to non-GAAP
subscription revenue used in ARPU
             
GAAP revenue $ 186,731     $ 187,818          
Fair value adjustment to deferred revenue 1,328     6,038          
Non-GAAP revenue $ 188,059     $ 193,856          
Professional services and other revenue (2,220 )   (1,697 )        
Non-GAAP subscription revenue used in ARPU $ 185,839     $ 192,159          
Average subscribers (in thousands) 3,497     3,433          
ARPU (Non-GAAP subscription revenue per
subscriber over 3 month period)    
$ 17.72     $ 18.66          


Web.com Group, Inc.
Reconciliations of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
               
Reconciliation of GAAP revenue to non-GAAP subscription revenue used in ARPU     Three months
ended March
31, 2017
           
GAAP revenue $ 185,118              
Fair value adjustment to deferred revenue 1,710              
    Non-GAAP revenue $ 186,828              
    Professional services and other revenue (1,771 )            
Non-GAAP subscription revenue used in ARPU $ 185,057              
    Average subscribers (in thousands) 3,490              
ARPU (Non-GAAP subscription revenue per subscriber over 3 month period) $ 17.67              
               
Reconciliation of GAAP revenue to non-GAAP revenue Guidance for three months ended
June 30, 2017 as of May 4, 2017
       
GAAP revenue $ 183,700   $ 186,700          
Fair value adjustment to deferred revenue 1,300     1,300          
Non-GAAP revenue $ 185,000   - $ 188,000          
                       

Note that the Company has not reconciled Adjusted EBITDA guidance to GAAP net income (loss) because it does not provide guidance on GAAP net income (loss) or the reconciling items between Adjusted EBITDA and net income (loss) as a result of the substantial uncertainty regarding, and the potential substantial variability of, these items.  The actual amount of net income (loss) and such responding reconciling items will have a significant effect on Adjusted EBITDA.  Accordingly a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.

 
Web.com Group, Inc.
Supplemental Information
(in thousands, except for per share data)
(unaudited)
           
  Three months ended June 30,   Six months ended June 30,
  2017   2016   2017   2016
Stock based compensation              
  Cost of revenue $ 281     $ 268     $ 550     $ 763  
  Sales and marketing 1,261     1,426     2,631     2,563  
  Technology and development 1,032     921     2,032     1,614  
  General and administrative 3,528     2,777     6,446     5,260  
Total $ 6,102     $ 5,392     $ 11,659     $ 10,200  
               
Revenue              
  Subscription $ 184,511     $ 186,121     $ 367,859     $ 329,312  
  Professional services and other 2,220     1,697     3,991     3,304  
Total $ 186,731     $ 187,818     $ 371,850     $ 332,616  
               
Other Information              
Non-GAAP operating income $ 42,899     $ 37,253     $ 84,525     $ 72,369  
GAAP interest expense $ 8,146     $ 8,662     $ 16,036     $ 14,259  
Amortization of debt issuance costs and other                     $ 3,702     $ 3,687     $ 7,399     $ 6,685  
Income taxes paid $ 1,212     $ 632     $ 1,573     $ 2,046  
Non-GAAP diluted weighted average common
shares
51,186     50,886     51,067     51,036  
               
Contacts
Investors:
Ira Berger
904-680-6909
Ira.Berger@web.com         

Media:
Brian Wright
904-371-6856
Brian.Wright@web.com