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Web.com Reports Record Fourth Quarter And Full Year 2012 Financial Results

Summary of Fourth Quarter 2012 Financial Results:

  • Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $111.4 million for the fourth quarter of 2012, compared to $73.6 million for the fourth quarter of 2011. Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $126.2 million for the fourth quarter of 2012, above the company's guidance range of $124.0 million to $125.5 million.  
  • Operating loss, calculated in accordance with GAAP, was $605 thousand for the fourth quarter of 2012 and included a $15.2 million negative impact related to the fair value adjustment to acquired deferred revenue and deferred expenses. For the fourth quarter of 2011, the company reported a GAAP operating loss of $32.8 million which included a $23.4 million negative impact from the fair value adjustment to acquired deferred revenue and deferred expenses, and $17.0 million of restructuring charges and corporate development expenses.  
  • GAAP net loss from continuing operations was $51.9 million, or $1.10 per diluted share, for the fourth quarter of 2012, and included the above-mentioned impact related to the fair value adjustment to acquired deferred revenue and deferred expenses, a $42.0 million charge related to the extinguishment of debt, and an income tax benefit of $4.7 million. GAAP net income from continuing operations was $669 thousand, or $0.02 per diluted share, in the fourth quarter of 2011, and included the above-mentioned impact related to acquired deferred revenue and deferred expenses, restructuring and corporate development expenses, as well as a $50.7 million tax benefit.   
  • Non-GAAP operating income was $35.0 million for the fourth quarter of 2012, compared to $23.2 million for the fourth quarter of 2011 and representing a non-GAAP operating margin of 28%.  
  • Non-GAAP net income from continuing operations was $22.7 million or $0.45 per diluted share for the fourth quarter of 2012, above the company's guidance of $20.9 to $21.4 million or $0.41 to $0.42 per diluted share. The Company had non-GAAP net income of $12.2 million, or $0.28 per diluted share, for the fourth quarter of 2011.   
  • Adjusted EBITDA was $37.4 million for the fourth quarter of 2012, compared to $24.8 million for the fourth quarter of 2011 and representing a 30% adjusted EBITDA margin.   
  • The Company generated cash from operations of $26.6 million for the fourth quarter of 2012 compared to $4.5 million for the fourth quarter of 2011.

Fourth Quarter and Recent Business Highlights:

  • Web.com's total net subscribers were 3,009,000 at the end of the fourth quarter of 2012, an increase of 18,000 from the end of the third quarter.  
  • Web.com's average revenue per user (ARPU) was $13.77 for the fourth quarter of 2012, representing a sequential increase of 2.1% from $13.49 in the third quarter of 2012 and growth of 7.1% from the $12.86 pro forma ARPU in the fourth quarter of 2011.  
  • Customer churn remained approximately 1% for the third quarter of 2012, consistent with the previous record low level.  
  • Web.com used $9.6 million in cash to reduce its debt balance during the quarter. Since closing the acquisition of Network Solutions, Web.com has reduced its debt balance by more than $70 million as of the end of the fourth quarter. The Company intends to continue using its strong cash flow to reduce its debt balance for additional savings in interest expense.  
  • During the fourth quarter, the company successfully refinanced and upsized its First Lien Credit Facility while simultaneously reducing its Second Lien Term Loan by a similar amount of $60 million. These transactions resulted in annualized interest savings of more than $12 million.  
  • Subsequent to its debt refinancing, Web.com drew down $20 million under its revolving credit facility and used $8 million from cash on hand to retire an additional $28 million of its Second Lien Term Loan, which had an outstanding balance of $32 million as of December 31, 2012 compared to $120 million as of December 31, 2011.

Summary of Full Year 2012 Financial Results:

  • Total revenue, calculated in accordance with GAAP, was $407.6 million for 2012, compared to $199.2 million for 2011. Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $491.4 million for 2012, compared to $234.4 million in 2011.   
  • Operating loss, calculated in accordance with GAAP, was $36.0 million for 2012 and included an $86.1 million negative impact related to the fair value adjustment to acquired deferred revenue and deferred expenses as well as $3.1 million in restructuring charges and corporate development expenses. For 2011, the company reported a GAAP operating loss of $40.8 million, which included a $36.0 million negative impact from the fair value adjustment to acquired deferred revenue and deferred expenses as well as $22.6 million in restructuring charges and corporate development expenses.  
  • GAAP net loss from continuing operations was $122.2 million, or $2.61 per diluted share, for 2012 and included the above-mentioned impact related to the fair value adjustment to acquired deferred revenue and deferred expenses, restructuring charges and corporate development expenses, a $42.0 million loss related to the extinguishment of debt, and an income tax benefit of $16.7 million. GAAP net loss from continuing operations was $12.5 million, or $0.41 per diluted share, in 2011, which included the above-mentioned impact from the fair value adjustment to acquired deferred revenue and deferred expenses, restructuring charges and corporate development expenses, as well as a $50.1 million income tax benefit.   
  • Non-GAAP operating income was $135.9 million for 2012, compared to $50.2 million for 2011 and representing a record annual non-GAAP operating margin of 28%.  
  • Non-GAAP net income from continuing operations was $79.8 million for 2012, or $1.59 per diluted share, compared to $35.3 million, or $1.05 per diluted share for 2011.   
  • Adjusted EBITDA was $144.5 million for 2012, compared to $54.2 million for 2011 and representing a record 29% annual adjusted EBITDA margin.   
  • Cash flow from operations was $78.0 million for 2012 compared to $14.9 million for 2011.

Conference Call Information

Management will host a conference call today February 7, 2013, at 5:00 p.m. (Eastern Time), to discuss Web.com's fourth quarter and full year financial results and other matters related to the Company's business and forward looking guidance on selected financial metrics. A live webcast of the call will be available at the "Investor Relations" page of Web.com's website, http://ir.web.com. To access the call, dial 877-407-3982 (domestic) or 201-493-6780 (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 407334.  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- and medium-sized businesses (SMBs). Web.com meets the needs of SMBs anywhere along their lifecycle by offering a full range of online services and support, including domain name registration, website design, search engine optimization, internet marketing and local sales leads, social media and mobile solutions, shopping cart software, eCommerce website design and call center services. For more information on the company, please visit http://www.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, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. 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.

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