Web.com, Inc. (WWWW)
Q4 2008 Earnings Call
February 10, 2009 5:00 pm ET
Peter Delgrosso – Vice President, Investor Relations
David L. Brown - Chief Executive Officer & Director
Jeffrey M. Stibel - President & Director
Kevin M. Carney - Chief Financial Officer
David Hilal - Friedman, Billings, Ramsey & Co.
Tim Brown – Roth Capital Partners, LLC
James Cakmak– Sidoti & Company
Sameet Sinha – JMP Securities
Stephen Ju – RBC Capital Markets
Scott Berg – ThinkEquity
Previous Statements by WWWW
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Thank you for joining us today to review Web.com’s fourth quarter and full year 2008 financial results. With me on the call today are David Brown, Chairman and CEO; Jeff Stibel, President; and Kevin Carney, Chief Financial Officer. After prepared remarks, we will open up the call to a question-and-answer session.
Please note that our remarks today contain forward-looking statements. Words such as anticipate, expect, may, believe, will and similar expressions are intended to identify forward-looking statements. These statements are based solely on our current expectations and are risks and uncertainties that can cause actual results and the timing of such results to differ materially from those projected in the forward-looking statements.
Please refer to our filings with the SEC and the risk factors contained therein including our quarterly report on Form 10-Q for the quarter ended September 30th, 2008 for more information on these risks and uncertainties and our limitations that apply to our forward-looking statements.
Web.com expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally this conference call may contain information that is deemed to be a non-GAAP financial measure.
A reconciliation to the nearest GAAP financial measure is available at our website www.Web.com under the Investor Relations tab. Also, please note that our webcast and today’s call will be available on our website in the IR section. With that I’d like to turn the call over to our Chairman and CEO, David Brown.
David L. Brown
Thank you all for joining us to review our fourth quarter and full year financial results which were consistent with or better than our guidance from both a revenue and earnings perspective. In particular revenue of $29 million was at the midpoint of our guidance while continued focus on operating efficiencies and expense management enabled the company to deliver record quarterly non-GAAP earnings per share of $0.23 which exceeded the high end of our guidance.
During 2008 we successfully combined Website Pros and Web.com which resulted in accelerated earnings growth, cost savings and a diversified online marketing and web services platform. While the economy has created a headwind on our near term revenue growth the efforts we made through combining the two companies has diversified and expanded the company’s long term growth opportunities.
The highlights to the fourth quarter was continued strong profitability, margin expansion and cash flow. For the first time in the history of the company we delivered a non-GAAP operating margin of over 22% and this was a key driver to another strong quarter for cash flow from operations.
While we remain cautious along with the rest of corporate America regarding the challenging economic conditions we remain confident in Web.com’s strategy and market position. We continue to enhance our business through strategic partnerships, customer experience enhancements and new sales and marketing initiatives that we believe will help Web.com drive top line growth when the economic environment improves.
It’s notable that since our founding Web.com has an established track record of delivering consistent solid growth from a revenue, subscriber and profitability perspective. We have executed successfully through previous difficult market environments positioning the company to gain market share and enjoy prosperous growth over the long term and we continue to believe the company is well positioned to repeat this cycle as we emerge from the current market downturn.
We are proud of Web.com’s numerous positive achievements during 2008. For starters the company quickly, aggressively and efficiently integrated what was essentially a merger of equals between Website Pros and Web.com delivering over $12 million in cost savings while at the same time driving our combined company churn to historic lows.
The end result is that we now have much larger critical mass, more efficient operations and a significantly more diversified distribution strategy. These are not only important for the long term but are essential to being successful in this more difficult economic environment. Secondly we proved the scalability of our combined company and financial model.
Our non-GAAP operating margin expanded throughout the year finishing at record levels for both the fourth quarter and full year 2008. In addition the company generated approximately $24.7 million in adjusted EBITDA excluding the impact of stock based compensation, goodwill and asset impairment and restructuring charges during 2008 which represented 20% of our revenue and an increase of over 129% on a year-over-year basis.
The third key accomplishment from a longer term perspective is that we continued to renew, expand and add high quality distribution partnerships during 2008 such as Discover, Yellow Book and Register.com to name a few. These types of partnerships position Web.com for long term growth.