ATLANTA, Aug. 8, 2006 (PRIMEZONE) -- Web.com, Inc. (Nasdaq:WWWW), the leading destination for websites and web services, today reported its results for its second quarter ended June 30, 2006.
Summary of Second Quarter 2006 Results:
-- Total revenues for the quarter were $12.1 million, down from
$12.3 million in the first quarter of 2006. The second quarter
marked the last quarter of recognizing Verizon revenues (a deal
that was initially cancelled in December 2004 and terminated in
the second quarter of 2006).
-- Net income for the quarter was negative $5.7 million, or
$(0.35) per share, including a $3.5 million charge from the
WebSource Media acquisition and $0.2 million in legal costs associated
with the acquisition, versus a negative $5.5 million, or $(0.34)
per share, in the quarter ended March 2006.
-- Adjusted net income from continuing operations(1) was negative
$3.6 million, including an impairment of $3.5 million from
WebSource Media and $0.2 million in legal costs associated
with the acquisition.
-- Net subscribers totaled approximately 148,000 for the quarter,
down from approximately 149,000 in the first quarter of 2006. The
reduction in the second quarter as compared to the first quarter
includes the loss of approximately 3,200 Verizon subscribers.
Excluding the loss of Verizon subscribers, the Company added
approximately 1,600 subscribers in the quarter.
"Web.com continued to drive subscriber growth across its core website and web services plans by refining our sales and marketing efforts and working closely with strategic distribution partners," stated Jeff Stibel, President and CEO, Web.com. "While we had unfortunate news about an acquisition we made during the quarter, the company has moved on and is working on further solidifying its position as a leader in the industry."
"The second quarter presented some challenges for Web.com, however if you exclude these events and look at the core business, the company was able to add subscribers within attractive subscriber acquisition rates," stated Gonzalo Troncoso, Executive Vice President and Chief Financial Officer. "The company has stated in the past that it intends to create a model that brings in new subscribers and up-sells them to new web services over time. This model is taking shape and we feel confident that over the long term it will be a cost-effective means to grow revenues and create long-standing relationships with our customer base."
About Web.com
Web.com, Inc. (NASDAQ: WWWW), formerly Interland, Inc. (NASDAQ: INLD), is the leading destination for the simplest, yet most powerful solutions for websites and web services. Web.com offers do-it-yourself and professional website design, website hosting, ecommerce, web marketing and email. Since 1995, Web.com has been helping individuals and small businesses leverage the power of the Internet to build a web presence. More than 4 million websites have been built or hosted using Web.com's proprietary tools, services and patented technology. For more information on the company, please visit www.web.com or www.interland.com or call at 1-800-WEB-HOST.
Web.com will host a conference call today to discuss its quarterly results at 9:30AM ET (6:30AM PT). A live webcast of the call can be accessed on the investors section of the company's website at www.web.com/ir. A replay of the call will be available on the site for seven days.
(1) Adjusted net income from continuing operations is a non-GAAP
financial measure and is defined as net income from continuing
operations excluding interest income or expense, provision for
income taxes, depreciation, amortization of intangibles, and
stock-based compensation.
Note Regarding Use of Non-GAAP Financial Measures
This earnings release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Web.com, Inc. has provided reconciliations below release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Adjusted net income (loss) from continuing operations is presented in this earnings release because management believes that this non-GAAP measure of financial performance provides investors with valuable insight into the Company's ongoing business and operating results from period-to-period. We define adjusted net income (loss) from continuing operations as net income (loss) from continuing operations excluding (i) provision for income taxes, (ii) interest income or expense, (iii) depreciation, (iv) amortization of intangibles, and (v) stock based compensation. Management uses this non-GAAP financial measure as a primary measure in monitoring and evaluating our ongoing operating results and trends of our operations. We believe that excluding income (loss) from discontinued operations provides a more relevant measure of our present web services business. Income (loss) from discontinued operations relates to the Company's prior business of manufacturing personal computers, which the Company sold in fiscal 2001, and is wholly unrelated to the Company's present web services business. Management believes the exclusion of stock based compensation provides a more consistent comparison against prior periods, since stock based compensation was not included in net income (loss) for prior fiscal years. Management believes that measuring the performance of the business without regard to interest, taxes and depreciation and amortization can make trends in operating results more readily apparent, and when considered with other information, assist management and investors in evaluating our ability to generate future earnings.
Adjusted net income (loss) from continuing operations should be considered in addition to, and not as a substitute for, net income or loss or other measures of financial performance reported in accordance with GAAP. Adjusted net income (loss) from continuing operations does not take into account costs of doing business that can be substantial, such as income taxes and interest expense. Adjusted net income (loss) from continuing operations may not be comparable to similarly captioned information reported by other companies.
Forward-Looking Statements
Except for the historical information contained in this press release, statements in this press release may be considered forward-looking statements. These forward-looking statements include, but are not limited to, the ability to stabilize the company's revenues and cost structure, increase customers and revenues, sell additional products and services to existing customers, create a well-known brand for the Company's product offerings, successfully access the consumer segment of the web hosting market and enter into strategic alliances with leading companies in the industry. Forward-looking statements are also identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue", similar expressions, and variations or negatives of these words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements are based on Web.com's current expectations, estimates, projections, beliefs and assumptions. These forward-looking statements speak only as of the date hereof and are based upon the information available to the Company at this time. Such information is subject to change, and the Company will not necessarily inform you of such changes. These statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, the Company's actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors. Factors which could affect these forward-looking statements, and Web.com's business, include but are not limited to: the ability to operate within budgeted expense, the ability of the Company to improve customer satisfaction, reduce churn, and expand its customer base as planned, growing dependence on reseller and other indirect sales channels, general economic conditions, the impact of competition, quarterly fluctuations in operating results, the loss of customers with failing businesses and customer churn in general, customer acceptance of new products and services, the retention of key employees, potential liabilities from the sale of dedicated server assets, possible disruptions for customers due to our data centers being maintained by third parties, higher than expected costs of litigation and the impact of liabilities that could carry over from the Company's discontinued operations. Certain of these and other risks associated with Web.com's business are discussed in more detail in its public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, its Quarterly Reports and Transition Report on Form 10-Q and its Current Reports on Form 8-K, and its most recent proxy statement. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update its forward-looking statements.
WEB.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the For the
three months ended six months ended
----------------- -------------------
June 30, May 31, June 30, May 31,
2006 2005 2006 2005
------- ------- -------- --------
Revenues $12,053 $22,307 $ 24,315 $ 44,929
Operating costs
and expenses:
Network operating costs,
exclusive of depreciation
shown below(a) 2,269 6,272 4,653 11,576
Sales and marketing,
exclusive of depreciation
shown below(a) 3,335 5,687 6,485 10,068
Technical support, exclusive
of depreciation shown
below(a) 1,761 3,005 3,483 6,659
General and administrative,
exclusive of depreciation
shown below(a) 4,696 7,672 14,608 15,378
Bad debt expense 242 535 519 1,000
Depreciation and amortization 2,225 5,686 3,359 10,992
Restructuring costs 23 1,666 66 1,666
Impairment of investment in
and advances to WebSource
Media 3,488 -- 3,488 --
Gain on sale of accounts -- (1,915) -- (1,915)
Other expense (income), net (2) (96) (3) (24)
------- ------- -------- --------
Total operating costs
and expenses 18,037 28,512 36,658 55,400
------- ------- -------- --------
Operating loss (5,984) (6,205) (12,343) (10,471)
Interest income (expense),
net 248 131 509 214
------- ------- -------- --------
Loss from continuing
operations before income
taxes (5,736) (6,074) (11,834) (10,257)
Income tax benefit 9 -- 863 --
------- ------- -------- --------
Loss from continuing
operations (5,727) (6,074) (10,971) (10,257)
------- ------- -------- --------
Net loss $(5,713) $(6,247) $(11,216) $(10,519)
======= ======= ======== ========
Net loss per share,
basic and diluted:
Continuing operations $ (0.35) $ (0.38) $ (0.67) $ (0.64)
Discontinued operations -- (0.01) (0.01) (0.02)
$ (0.35) $ (0.39) $ (0.68) $ (0.66)
======= ======= ======== ========
Number of shares used in
per share calculation:
Basic and diluted 16,511 16,032 16,453 16,024
(a) Includes stock-based
compensation as follows:
Network operating costs $ 6 $ -- $ 12 $ --
Sales and marketing 39 -- 54 --
Technical support 9 -- 17 --
General and
administrative 105 -- 5,413 162
------- ------- -------- --------
Total stock-based
compensation $ 159 $ -- $ 5,496 $ 162
======= ======= ======== ========
WEB.COM, INC.
Adjusted Net Income (Loss) from Continuing Operations
Reconciliation to Net Income (Loss)
(In thousands)
(Unaudited)
For the For the
three months ended six months ended
------------------- -------------------
June 30, May 31, June 30, May 31,
2006 2005 2006 2005
-------- -------- -------- --------
Net loss $ (5,713) $ (6,247) $(11,216) $(10,519)
Depreciation and
amortization 2,225 5,686 3,359 10,992
Amortization of stock-
based compensation 159 -- 5,496 162
Interest expense (income) (248) (131) (509) (214)
Income tax benefit (9) -- (863) --
Discontinued operations (14) 173 245 262
-------- -------- -------- --------
Adjusted net income (loss)
from continuing
operations $ (3,600) $ (519) $ (3,488) $ 683
======== ======== ======== ========
WEB.COM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
As of
----------------------
June 30, December 31,
2006 2005
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 13,163 $ 17,370
Trade receivables, net of allowance for
doubtful accounts 1,739 1,812
Other receivables 1,139 1,180
Other current assets 1,698 2,026
Restricted investments 279 276
--------- ---------
Total current assets 18,018 22,664
Restricted investments 8,322 9,015
Securities, held-to-maturity -- 53
Property, plant and equipment, net 4,757 6,303
Goodwill 921 921
Intangibles, net 5,900 6,568
Other assets 5,600 5,600
--------- ---------
Total assets $ 43,518 $ 51,124
========= =========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 1,893 $ 934
Accrued expenses 6,637 6,232
Accrued restructuring charges 2,838 4,416
Current portion of long-term debt and
capital lease obligations 1,716 1,693
Deferred revenue 4,517 4,637
--------- ---------
Total current liabilities 17,601 17,912
Long-term debt and capital lease obligations 2,906 3,850
Deferred revenue, long-term 239 206
Other liabilities 155 934
--------- ---------
Total liabilities 20,901 22,902
--------- ---------
Commitments and contingencies
(note 9) -- --
Shareholders' equity
Common stock, $.01 par value, authorized
26 and 21 million shares, issued and
outstanding 16.6 and 16.6 million shares,
respectively 166 166
Additional capital 331,104 325,493
Warrants 2,128 2,128
Note receivable from shareholder (735) (735)
Accumulated deficit (310,046) (298,830)
--------- ---------
Total shareholders' equity 22,617 28,222
--------- ---------
Total liabilities and shareholders' equity $ 43,518 $ 51,124
========= =========
WEB.COM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
As of
----------------------
June 30, March 31,
2006 2006
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 13,163 $ 16,790
Trade receivables, net of allowance for
doubtful accounts 1,739 1,559
Other receivables 1,139 706
Other current assets 1,698 1,707
Restricted investments 279 278
--------- ---------
Total current assets 18,018 21,040
Restricted investments 8,322 8,567
Securities, held-to-maturity -- 53
Property, plant and equipment, net 4,757 6,435
Goodwill 921 907
Intangibles, net 5,900 6,233
Other assets 5,600 5,606
--------- ---------
Total assets $ 43,518 $ 48,841
========= =========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 1,893 $ 910
Accrued expenses 6,637 6,290
Accrued restructuring charges 2,838 3,121
Current portion of long-term debt and capital
lease obligations 1,716 1,708
Deferred revenue 4,517 4,671
--------- ---------
Total current liabilities 17,601 16,700
Long-term debt and capital lease obligations 2,906 3,384
Deferred revenue, long-term 239 243
Other liabilities 155 355
--------- ---------
Total liabilities 20,901 20,682
--------- ---------
Commitments and contingencies
(note 9) -- --
Shareholders' equity
Common stock, $.01 par value, authorized
26 and 21 million shares, issued and
outstanding 16.6 and 16.6 million shares,
respectively 166 166
Additional capital 331,104 330,933
Warrants 2,128 2,128
Note receivable from shareholder (735) (735)
Accumulated deficit (310,046) (304,333)
--------- ---------
Total shareholders' equity 22,617 28,159
--------- ---------
Total liabilities and shareholders' equity $ 43,518 $ 48,841
========= =========
WEB.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the
six months ended
--------------------
June 30, May 31,
2006 2005
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(11,216) $(10,519)
Adjustments to reconcile net loss to net cash
used in operating activities from continuing
operations:
Loss from discontinued operations 245 262
Depreciation and amortization 3,359 10,992
Bad debt expense 519 1,000
Gain on sale of assets (4) (24)
Gain on sale of accounts -- (1,915)
Impairment of investment in and advances to
WebSource Media 3,488 --
Stock-based compensation 5,496 162
Restructuring costs 66 1,666
Changes in operating assets and liabilities
net of effect of acquisition:
Receivables (405) (895)
Other current assets 328 504
Accounts payable, accrued expenses and
deferred revenue (1,338) 1,291
-------- --------
Cash provided by (used in) operating
activities of continuing operations 538 2,524
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant,
and equipment (1,141) (6,421)
Payment for purchase of WebSource Media (3,261) --
Net proceeds from sale of accounts -- 2,733
Purchase of held-to-maturity investment
securities -- (50)
Proceeds from sale of held-to-maturity
investment securities 53 --
Purchases of auction rate securities -- (6,000)
Proceeds from auction rate securities -- 19,025
Net change in restricted investments 690 594
-------- --------
Cash (used in) provided by investing activities
of continuing operations (3,659) 9,881
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of debt and capital lease obligations (921) (1,206)
Proceeds from exercises of stock options 115 37
-------- --------
Cash used in financing activities of
continuing operations (806) (1,169)
-------- --------
Net cash (used in) provided by continuing
operations (3,927) 11,236
-------- --------
Net cash used in discontinued operations
(Revised - See note 2)
Operating cash flows (280) (401)
Investing cash flows -- --
Financing cash flows -- --
-------- --------
Total cash flows used in discontinued
operations (280) (401)
-------- --------
Net increase (decrease) in cash and
cash equivalents (4,207) 10,835
Cash and cash equivalents at beginning
of period 17,370 13,132
-------- --------
Cash and cash equivalents at end of period $ 13,163 $ 23,967
======== ========