JACKSONVILLE, Fla., Aug. 4, 2008 (PRIME NEWSWIRE) -- 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
======== ========