Web.com Group, Inc. (WWWW), which owns the top 10 domain name registrars, NetworkSolutions.com and Register.com announced results for the first quarter ended March 31, 2013 on Thursday night.

After reporting results shares of the company hit an all time high on Friday

Here are the highlights:

• Added 21,000 net new subscribers, ending the quarter at 3.03 million subscribers
• Average Revenue Per User of $13.89 grew $0.12 sequentially
• Completed second debt re-financing increasing total annualized interest savings to $18 million

“Web.com delivered a strong performance to start 2013, with first quarter revenue and profitability exceeding the high end of our guidance,” said David Brown, Chairman and CEO of Web.com.

“The successful expansion of our average revenue per user and 3 million plus subscriber base is improving the long-term growth profile of Web.com. We also remain focused on maintaining our strong margins and looking for opportunities to further enhance profitability, such as our recent debt re-financings that are expected to drive annualized interest savings of more than $18 million.”

Summary of First Quarter 2013 Financial Results:

 

• Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $115.5 million for the first quarter of 2013, compared to $91.5 million for the first quarter of 2012. Non-GAAP revenue was $128.1 million for the first quarter of 2013, up 7% on a year-over-year basis and above the high end of the company’s guidance range of $126.5 million to $128.0 million.
• GAAP operating loss was $2.5 million for the first quarter of 2013. For the first quarter of 2012, the company reported a GAAP operating loss of $18.5 million. Non-GAAP operating income was $34.2 million for the first quarter of 2013, an increase from $32.0 million for the first quarter of 2012, and representing a non-GAAP operating margin of 27%.
• GAAP net loss from continuing operations was $46.5 million, or ($0.97) per diluted share, for the first quarter of 2013, including a $19.5 million charge for a loss related to debt extinguishment. GAAP net loss from continuing operations was $29.8 million, or ($0.65) per diluted share, in the first quarter of 2012. Non-GAAP net income from continuing operations was $24.5 million for the first quarter of 2013, or $0.48 per diluted share, up 37% on a year-over-year basis and above the company’s guidance of $0.44 to $0.46 per diluted share. The Company had non-GAAP net income of $17.2 million, or $0.35 per diluted share, for the first quarter of 2012.
• The Company generated cash from operations of $11.0 million for the first quarter of 2013, or $18.2 million excluding a $7.2 million one-time prepayment penalty paid as part of its recent debt refinancing. This compared to $14.8 million of cash flow from operations for the first quarter of 2012.

 

First Quarter and Recent Business Highlights:

 

• Web.com’s total net subscribers were approximately 3,030,000, at the end of the first quarter of 2013, up more than 21,000 from the end of the fourth quarter.
• Web.com’s average revenue per user (ARPU) was $13.89 for the first quarter of 2013, representing a sequential increase of $0.12 from $13.77 for the fourth quarter of 2012.
• Customer churn was approximately 1% for the first quarter of 2013, consistent with the previous record low levels of recent quarters.

 

 

 

Web.com Group, Inc.
Consolidated Statement of Comprehensive Loss
(in thousands, except for per share data)
(unaudited)
	Three months ended March 31,
	2013	2012
Revenue	$115,546	$91,514
Cost of revenue	42,640	38,608
Gross profit	72,906	52,906
Operating expenses:
Sales and marketing	33,364	26,844
Research and development	8,212	9,707
General and administrative	13,780	14,306
Restructuring charges	—	912
Depreciation and amortization	20,040	19,679
Total operating expenses	75,396	71,448
Loss from operations	(2,490)	(18,542)
Interest expense, net	(9,951)	(17,776)
Loss from debt extinguishment	(19,526)	—
Net loss before income taxes	(31,967)	(36,318)
Income tax (expense) benefit	(14,536)	6,539
Net loss	$(46,503)	$(29,779)
Other comprehensive income:
Unrealized gains on investments, net of tax	9	—
Total comprehensive loss	$(46,494)	$(29,779)
Basic earnings per share:
Net loss per common share	$(0.97)	$(0.65)
Diluted earnings per share:
Net loss per common share	$(0.97)	$(0.65)

 

Web.com Group, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
	March 31, 2013	December 31, 2012
	(unaudited)	(audited)
Assets
Current assets:
Cash and cash equivalents	$13,587	$15,181
Accounts receivable, net of allowance of $2,281 and $2,337, respectively	16,754	15,007
Prepaid expenses	10,776	6,697
Deferred expenses	59,311	59,255
Deferred taxes	13,781	18,092
Other current assets	4,984	5,116
Total current assets	119,193	119,348
Property and equipment, net	40,786	40,079
Deferred expenses	62,632	63,147
Goodwill	628,176	628,176
Intangible assets, net	452,417	469,703
Other assets	5,581	6,817
Total assets	$1,308,785	$1,327,270
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$7,389	$6,385
Accrued expenses	12,990	11,562
Accrued compensation and benefits	4,280	15,413
Accrued restructuring costs and other reserves	746	1,477
Deferred revenue	201,174	191,149
Current portion of debt	42,217	4,681
Other liabilities	2,691	2,556
Total current liabilities	271,487	233,223
Deferred revenue	183,577	175,816
Long-term debt	657,529	688,140
Deferred tax liabilities	74,032	64,126
Other long-term liabilities	5,258	4,352
Total liabilities	1,191,883	1,165,657
Stockholders’ equity:
Common stock, $0.001 par value per share: 150,000,000 shares authorized, 49,692,899 and 49,175,642 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively	50	49
Additional paid-in capital	455,804	454,022
Accumulated other comprehensive income	14	5
Accumulated deficit	(338,966)	(292,463)
Total stockholders’ equity	116,902	161,613
Total liabilities and stockholders’ equity	$1,308,785	$1,327,270

 

 

Web.com Group, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except for per share data)
(unaudited)
	Three months ended March 31,
	2013	2012
Reconciliation of GAAP revenue to non-GAAP revenue
GAAP revenue	$115,546	$91,514
Fair value adjustment to deferred revenue	12,547	27,823
Non-GAAP revenue	$128,093	$119,337
Reconciliation of GAAP net loss to non-GAAP net income
GAAP net loss	$(46,503)	$(29,779)
Amortization of intangibles	17,286	17,692
(Gain) loss on sale of assets	(6)	402
Stock based compensation	6,365	2,680
Income tax expense (benefit)	14,536	(6,539)
Restructuring charges	—	912
Corporate development	—	334
Amortization of deferred financing fees	583	3,323
Cash income tax expense	(286)	(285)
Fair value adjustment to deferred revenue	12,547	27,823
Fair value adjustment to deferred expense	454	676
Loss on debt extinguishment	19,526	—
Non-GAAP net income	$24,502	$17,239
Reconciliation of GAAP basic net loss per share to non-GAAP basic net income per share
Basic GAAP net loss	$(0.97)	$(0.65)
Amortization of intangibles	0.36	0.39
(Gain) loss on sale of assets	—	0.01
Stock based compensation	0.13	0.06
Income tax expense (benefit)	0.30	(0.14)
Restructuring charges	—	0.02
Corporate development	—	0.01
Amortization of deferred financing fees	0.01	0.07
Cash income tax expense	(0.01)	(0.01)
Fair value adjustment to deferred revenue	0.26	0.60
Fair value adjustment to deferred expense	0.01	0.01
Loss on debt extinguishment	0.42	—
Basic Non-GAAP net income per share	$0.51	$0.37
Reconciliation of GAAP diluted net loss per share to non-GAAP diluted net income per share
Diluted shares:
Basic weighted average common shares	48,085	46,140
Diluted stock options	2,134	2,279
Diluted restricted stock	681	1,096
Total diluted weighted average common shares	50,900	49,515
Diluted GAAP net loss per share	$(0.97)	$(0.65)
Diluted equity	0.06	0.04
Amortization of intangibles	0.33	0.37
(Gain) loss on sale of assets	—	0.01
Stock based compensation	0.13	0.05
Income tax expense (benefit)	0.29	(0.13)
Restructuring charges	—	0.02
Corporate development	—	0.01
Amortization of deferred financing fees	0.01	0.07
Cash income tax expense	(0.01)	(0.01)
Fair value adjustment to deferred revenue	0.25	0.56
Fair value adjustment to deferred expense	0.01	0.01
Loss on debt extinguishment	0.38	—
Diluted Non-GAAP net income per share	$0.48	$0.35
Reconciliation of GAAP operating loss to non-GAAP operating income
GAAP operating loss	$(2,490)	$(18,542)
Amortization of intangibles	17,286	17,692
(Gain) loss on sale of assets	(6)	402
Stock based compensation	6,365	2,680
Restructuring charges	—	912
Corporate development	—	334
Fair value adjustment to deferred revenue	12,547	27,823
Fair value adjustment to deferred expense	454	676
Non-GAAP operating income	$34,156	$31,977
Reconciliation of GAAP operating margin to non-GAAP operating margin
GAAP operating margin	(2)%	(20)%
Amortization of intangibles	13	15
(Gain) loss on sale of assets	—	—
Stock based compensation	5	2
Restructuring charges	—	1
Corporate development	—	—
Fair value adjustment to deferred revenue	10	28
Fair value adjustment to deferred expense	1	1
Non-GAAP operating margin	27%	27%
Reconciliation of GAAP operating loss to adjusted EBITDA
GAAP operating loss	$(2,490)	$(18,542)
Depreciation and amortization	20,040	19,679
(Gain) loss on sale of assets	(6)	402
Stock based compensation	6,365	2,680
Restructuring charges	—	912
Corporate development	—	334
Fair value adjustment to deferred revenue	12,547	27,823
Fair value adjustment to deferred expense	454	676
Adjusted EBITDA	$36,910	$33,964
Reconciliation of GAAP operating margin to adjusted EBITDA margin
GAAP operating margin	(2)%	(20)%
Depreciation and amortization	16	16
(Gain) loss on sale of assets	—	—
Stock based compensation	5	2
Restructuring charges	—	1
Corporate development	—	—
Fair value adjustment to deferred revenue	10	28
Fair value adjustment to deferred expense	—	1
Adjusted EBITDA margin	29%	28%
Revenue
Subscription	$113,280	$88,850
Professional services and other	2,266	2,664
Total	$115,546	$91,514
Stock based compensation
Cost of revenue	$528	$305
Sales and marketing	1,498	616
Research and development	833	481
General and administration	3,506	1,278
Total	$6,365	$2,680

 

Web.com Group, Inc.
Consolidated Statement of Cash Flows
(in thousands, except for per share amounts)
(unaudited)
	Three months ended March 31,
	2013	2012
Cash flows from operating activities
Net loss	$(46,503)	$(29,779)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from debt extinguishment	12,286	—
Depreciation and amortization	20,040	19,679
Stock based compensation	6,365	2,680
Deferred income taxes	14,217	(6,824)
Amortization of debt issuance costs and other	577	3,725
Changes in operating assets and liabilities:
Accounts receivable, net	(1,747)	(2,156)
Prepaid expenses and other assets	(5,098)	(3,294)
Deferred expenses	460	(1,039)
Accounts payable	2,045	2,958
Accrued expenses and other liabilities	2,469	(972)
Accrued compensation and benefits	(11,133)	(8,136)
Accrued restructuring	(731)	(1,624)
Deferred revenue	17,786	39,605
Net cash provided by operating activities	11,033	14,823
Cash flows from investing activities
Capital expenditures	(4,496)	(2,679)
Net cash used in investing activities	(4,496)	(2,679)
Cash flows from financing activities
Stock issuance costs	(2)	(86)
Common stock repurchased	(5,666)	(3,199)
Payments of long-term debt	(669,576)	(11,500)
Proceeds from exercise of stock options	1,085	1,602
Proceeds from long-term debt issued	668,350	—
Debt issuance costs	(2,322)	—
Net cash used in financing activities	(8,131)	(13,183)
Net decrease in cash and cash equivalents	(1,594)	(1,039)
Cash and cash equivalents, beginning of period	15,181	13,364
Cash and cash equivalents, end of period	$13,587	$12,325
Supplemental cash flow information
Interest paid	$15,635	$14,755
Income tax (received) paid	$(31)	$58