Web.com Group's CEO Presents At Citi Technology Conference (Transcript)

Web.com Group, Inc. (WWWW)

Citi Technology Conference Call

September 6, 2012 9:30 am ET

Executives

David L. Brown – Chairman, President and Chief Executive Officer

Kevin Carney – Executive Vice President & Chief Financial Officer

Analysts

Walter H. Pritchard – Citigroup Global Markets Inc.

Presentation

Walter H. Pritchard – Citigroup Global Markets Inc.

I’m Walter Pritchard, Software Analyst with Citi. Happy to have with us, Web.com, got Kevin Carney; who is the CFO, and we’ve got David Brown, the CEO. I’m going to go through some questions, I think probably are common to what the audience has on their minds, open it up with about 10 minutes left, and anybody who have questions we’ll circulate the microphones as we have been doing in this room.

So I guess just to start off the discussion, the company has been growing through acquisitions aggressively in the last 2.5 or so years, could you just give us an update on such as the Network Solutions acquisition, you quadruple your customer base through that acquisition, so you get to parts and support, where you are with that, and what we should be looking for the next few quarters as we assess the targets along that.

David L. Brown

Sure. The Network Solutions transactions has gone extremely well. It follows the game plan that we rolled out, when we did Register.com acquisition, which was about a year prior to that. From an integration perspective, where half or haven’t scheduled, in achieving our cost synergy. That’s terrific we are also performing very well from a customer churn perspective, we’ve actually outperformed our own expectations there and we’re clearly integrating that company in a way that it’s not impacting our customers negatively, and so we’re seeing very low churn in the business.

We are also very pleased with the cross sell and up sell that we’re seeing into that base, very similar to the Register deal where we had very effective cross sell and up sell opportunities. We are actually seeing better opportunities in Network Solutions, the customers are more receptive, it’s frankly just much larger opportunity , and that’s one of the key reasons, why we see revenue growth in our business, given in this scale, as we add more sale resources and began to work with that customer base, we’re able to drive revenue growth at higher rates of growth than we’ve seen historically.

Walter H. Pritchard – Citigroup Global Markets Inc.

Can you talk about just the profile of the two customer base of the Net Sol customer base versus what you had on what pre-Register and what are sort of the low hanging fruit that are driving the up sell and the ARPU increases and then how do you look at so sustaining that beyond that initial period?

David L. Brown

So Network Solutions besides the fact that it’s just far and larger than Register.com, its multiple seven multiples larger, so remarkably similar customer base. Very oriented towards small businesses, about 70% of the Network Solutions customers were small businesses, the remaining 30% are spread over the consumers, a category we called international, which could include small businesses, but we don’t necessarily know because they come to us quite accidently through the Internet, and a very, very small group of enterprise customer.

So 70 plus percent small businesses, Register was even greater small business. So not perspective, it gives us really good visibility into what to expect, where we’re having the most success today selling our value added products through the Network Solutions customers. What we found is in both these companies, Register and Network, they were wonderful domain companies, but they had very limited product portfolio outside of hosting and some Do It Yourself products. So we brought to them products like online marketing products, it helps your website, get found in a local search.

eCommerce products that help you sell things online. Social media products like our Facebook products. We brought the mobile products, so you can be found in mobile searching. Those are the products right now that are having the greatest attraction, those plus one more; we believe that as mass adoption occurs and we believe that we are right in the midst of the early stages of mass adoptions, by small businesses even our Do It For Me website products is very valuable.

If you think about a product typical customer that would be a plumber, an electrician or restaurant or someone who has a six day week job, probably a 11 hours a day kind of work patterns and they not even have a website today, it’s just that the website doesn’t got any traffic, so it was build by their son, their daughter, or a friend or a local ad agency that since moved on and their website wasn’t optimized, it’s not been submitted to the search engine, it has no traffic, and so our Do It For Me, product which is $94.50 a month product, to solve that tough case for these customers. I would tell you that’s the number one, selling product we have right now, but all those other categories are also growing at very, very fastly.

Walter H. Pritchard – Citigroup Global Markets Inc.

That’s number one. Overall, is that number one came to that phase.

David L. Brown

Into that phase. You would see a company wide perspective we’re using domains as a new customer acquisition channel and we just effectively taken two companies that we are shrinking and turn them around, and we’ve done that because we are able to sell approximately $100 in average order value in the first year to a domain customer irrespective of the price that we sell in the domain now.

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