Web.com Reports Third Quarter 2016 Financial Results

  • Reduced debt by $23.0 million
  • Generated $44.5 million in operating cash flow, up 26% year over year
  • Added $100 million to stock repurchase authorization and extended to end of 2018

JACKSONVILLE, Fla., Nov. 03, 2016 (GLOBE NEWSWIRE) -- Web.com Group, Inc. (NASDAQ:WEB), a leading provider of Internet services and online marketing solutions for small businesses, today announced results for the third quarter ended September 30, 2016.   

"Web.com reported solid third quarter results highlighted by strong profitability and year over year growth in our value added services products.  We have made good progress in our integration of Yodle and identified several product integration and go to market adjustments designed to better position the Company for improved performance over time.  We believe the changes we are making will have a near term financial impact, but these steps are absolutely the right strategic moves for Web.com," said David L. Brown, chairman, chief executive officer and president of Web.com.

Brown added, "We will be more measured in our investments during the integration and maintain our focus on strong profitability and cash flow.  Today's announcement of a $100 million expansion and extension of our share repurchase program will provide us additional flexibility to deploy our significant free cash flow in ways that enhance shareholder value."

Summary of Third Quarter 2016 Financial Results:
  • Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $190.7 million for the third quarter of 2016, compared to $136.8 million for the third quarter of 2015. Non-GAAP revenue was $192.8 million for the third quarter of 2016, compared to $140.4 million in the year-ago quarter, and slightly below the Company's guidance range of $193 million to $195 million.  The year over year increase in revenue is primarily due to the acquisition of Yodle. 
  • GAAP operating income was $18.1 million for the third quarter of 2016, representing a 9% GAAP operating margin, compared to $16.7 million, representing a 12% GAAP operating margin, for the third quarter of 2015.  Non-GAAP operating income was $43.9 million for the third quarter of 2016, representing a 23% non-GAAP operating margin, compared to $35.3 million for the third quarter of 2015, representing a 25% non-GAAP operating margin. 
  • GAAP net income was $3.3 million, or $0.07 per diluted share, for the third quarter of 2016, representing a 2% GAAP net income margin. GAAP net income was $6.1 million, or $0.12 per diluted share, for the third quarter of 2015, representing a 4% GAAP net income margin. Non-GAAP net income was $38.4 million for the third quarter of 2016, or $0.76 per diluted share, exceeding the high end of the Company's net income guidance of $32 million to $34 million, or $0.63 to $0.67 per diluted share. The Company had non-GAAP net income of $32.5 million, or $0.62 per diluted share, for the third quarter of 2015. 
  • Adjusted EBITDA was $49.6 million for the third quarter of 2016, compared to $39.3 million for the third quarter of 2015, representing a 26% and 28% adjusted EBITDA margin during the three months ended September 30, 2016 and 2015, respectively. 
  • The Company generated cash from operations of $44.5 million for the third quarter of 2016, compared to $35.2 million of cash flow from operations for the third quarter of 2015. 
  • Capital expenditures in the third quarter of 2016 increased in part due to a $1.9 million adjustment to conform Yodle and Web.com accounting practices.  This will not have an impact on the full year results, but in the third quarter of 2016, it also reduced operating expenses and increased operating cash flow by $1.9 million.

Third Quarter and Recent Business Highlights:
  • Web.com's total net subscribers were approximately 3,447,000 at the end of the third quarter of 2016, up approximately 5,000 from the end of the second quarter of 2016. 
  • Web.com's average revenue per user (ARPU) was $18.47 for the third quarter of 2016 compared to $13.90 for the third quarter of 2015.  ARPU was down sequentially during the third quarter of 2016 from $18.66 during the second quarter of 2016. 
  • Web.com's trailing twelve month customer retention rate was 86.0% for the third quarter of 2016. 
  • Web.com used $23.0 million in cash to reduce debt during the quarter. 
  • Repurchased 32,000 shares for $0.6 million in the third quarter of 2016.

Conference Call InformationManagement will host a conference call today, November 3, 2016, at 5:00 p.m. ET, to discuss Web.com's third 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 800-239-9838 (domestic) or 913-312-0702 (international). A replay of this conference call will be available until November 17, 2016, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay conference ID is 2618752.

About Web.com Web.com Group, Inc. (Nasdaq:WEB) provides 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 and eCommerce solutions. For more information, please visit www.web.com; follow Web.com on Twitter @webdotcom or on Facebook at 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.

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