Web.com Reports Fourth Quarter And Full Year 2010 Financial Results

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

4Q Adjusted EBITDA Grows to a Record $9.1 Million

Customer Churn Reduced to Record Lows

JACKSONVILLE, Fla., Feb. 8, 2011 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (Nasdaq:WWWW), a leading provider of internet services and online marketing solutions for small businesses, today announced results for the fourth quarter and full year ended December 31, 2010.   

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

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

Summary of Fourth Quarter 2010 Financial Results:

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

Fourth Quarter and Recent Business Highlights:

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

Conference Call Information

Management will host a conference call to discuss Web.com's results and other matters related to the Company's business and guidance related to future results, today February 8, 2011, at 5:00 p.m. (Eastern Time). A live webcast of the call will be available at the "Investor Relations" page of the Company's website, http://www.web.com. To access the call, dial 877-407-0784 (domestic) or 201-689-8560 (international). A replay of this conference call will be available for a limited time at 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 364705. A replay of the webcast will also be available for a limited time at http://ir.web.com.

About Web.com

Web.com Group, Inc. (Nasdaq: WWWW) is a leading provider of internet services and online marketing solutions for small businesses. Web.com meets the needs of small businesses anywhere along their lifecycle by offering a full range of online services and support, including domain name registration services, website design, logo design, search engine optimization, search engine marketing and local sales leads, general contractor leads, franchise and homeowner association websites, shopping cart software, eCommerce web site design and call center services. For more information on the company, please visit http://www.web.com/ or call 1-800-GETSITE.

Note to Editors: Web.com is a registered trademark of Web.com Group, Inc.

Use of Non-GAAP Financial Measures

Some of the measures in this press release are non-GAAP financial measures within the meaning of the SEC Regulation G. Web.com believes presenting non-GAAP net income attributable to common stockholders, non-GAAP net income per share attributable to common stockholders and non-GAAP operating income is useful to investors, because it describes the operating performance of the company, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Company management uses these non-GAAP measures as important indicators of the Company's past performance and in planning and forecasting performance in future periods. The non-GAAP financial information Web.com presents may not be comparable to similarly-titled financial measures used by other companies, and investors should not consider non-GAAP financial measures in isolation from, or in substitution for, financial information presented in compliance with GAAP. You are encouraged to review the reconciliation of non-GAAP financial measures to GAAP financial measures included elsewhere in this press release.