You are on page 1of 29

Investor Presentation

May 2013

Updated and posted as of May 21, 2013 1

Safe Harbor Statement
This presentation includes certain "forward-looking statements" including, without limitation, statements regarding Web.com’s expectations about its future financial performance and market position, that are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements. These forwardlooking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this presentation that are not historical facts. These statements are sometimes identified by words such as “believe”, “growing”, “emerge” or words of similar meaning. These statements are based on our current beliefs or expectations, and there are a number of important factors that could cause the actual results or outcomes to differ materially from those indicated by these forward-looking statements, including, without limitation, our ability to integrate acquired businesses, our ability to maintain our sales efficiency, our ability to maintain our existing, and develop new, strategic relationships, the number of our net subscriber additions and our monthly customer turnover. These and other risk factors are set forth under the caption "Risk Factors" in Web.com’s Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission, which is available on a website maintained by the Securities and Exchange Commission at www.sec.gov. Web.com expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein as a result of new information, future events or otherwise.

Non-GAAP Measures
Some of the measures in this presentation are non-GAAP financial measures within the meaning of the SEC Regulation G. Web.com believes presenting non-GAAP financial measures is useful to investors, because it describes the operating performance of the company, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Company 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. You are encouraged to review the reconciliation of non-GAAP financial measures to GAAP financial measures included in Web.com’s filings with the Securities and Exchange Commission, which are available at www.sec.gov as well as in this presentation.

2

social. mobile.Investment Highlights       At center of powerful market drivers: mass adoption of internet. local Large installed subscriber base with significant growth potential Unmatched breadth and depth of proprietary products and services Demonstrated ability to grow organically and via acquisition Recurring revenue base with high visibility/predictability Attractive model with strong financial performance 3 .

44.9 million 29% Adjusted EBITDA margin Cash from operations Unlevered Free Cash Flow $18.48 per diluted share Exceeded company guidance of $22.$128 million $24.2 million one-time debt prepayment penalty $23.5 .4 million or $0.$23.6 .1Q 2013 Highlights Non-GAAP Revenue Non-GAAP Net Income $128.1 million Increase of ~7% over prior year Non-GAAP revenue Exceeded company guidance of $126.$0.2 million Excludes $7.1 million Excludes $7.2 million one-time debt prepayment penalty 4 .5 million or $0.46 per share Adjusted EBITDA $36.

with monthly churn ~1% Average Revenue per User (ARPU) $13.000 Net New Subscribers 21.000 Customer Retention 99% Continued at record high levels.1Q 2013 Highlights Total Subscribers 3.030.89/month Increased from $13.77 in 4Q 2012 5 .

SMBs Need Help Save me time Help me make money  Lots of handholding  Products & services that are easy to:  Choose – bundle it  Purchase  Use  Customer service to help them throughout their lifecycle  Solutions that deliver real customer sales  Single trusted provider 6 .

Value Proposition Broad suite of solutions caters to SMBs at all stages Customized and efficient process Value measurement  Domain name to start online presence  Consultative approach to customers to make sure the SMBs online marketing message is articulated clearly  Analytics to track traffic and leads  Online marketing and eCommerce to acquire customers  Tools to track campaigns  Higher ROI vs. print media  Social/mobile to extend presence  Expert teams work together on separate work streams  Bundled and a la carte solutions customized for SMBs  Up and running in less than 7 days Extracting and Articulating the SMB’s Online Marketing Message 7 .

Bundled Solutions are Our Core Offering eWorks! XL bundle   Gorilla Marketing bundle   Online Directory Advertising Google Places Google Maps Website Statistics eCommerce Standard   DIY website Email services   Product Management Payment Processing  SSL security Facebook Boost l SmartCalls    Local search Lead gen Mobile marketing  SEM 8 .

000+ / month $150 / month $95 / month $100s / month SSL certificates: DIY eCommerce: DIY Business Builder: DIY Website Builder: Mobile Products SmartCalls: Facebook Boost Full Service SEO $190/ month Starting at $300/ month Unix Hosting: Windows Hosting: Domains: 9 .Broad Suite of Offerings Sold Through Multiple Channels DIFM – Do it for me Offering    Bundled solutions Higher ARPU DIY – Do it yourself   Products Lower ARPU Higher subscriber acquisition cost  Lower subscriber acquisition cost  Online marketing  Partners Sales channels    Direct response TV Call center Feet on the Street  Inbound calls $50-150 / year Starting at $35 / month $30 / month $20 / month $6 / month $13-37 / month Starting at $12 / month $5-37 / year Leads by Web: DIFM eCommerce: eWorks XL $750-1.

Powerful Combination of Revenue and Earnings Growth Drivers     ARPU growth Subscriber growth Low subscriber churn Significant cost synergies Deleveraging  10 .

com in 2010 and Network Solutions in 2011 11 .Accelerating Growth in Recurring Revenue Annual Non-GAAP revenues ($mm) $500 $491 Pro-forma Quarterly Non-GAAP revenues ($mm) $130 $128 $128 $400 $126 $124 $126 $124 $300 $234 $122 $122 $200 $133 $107 $120 $118 $119 $100 $116 $114 $2009 2010 2011 2012 $112 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 Note: Acquired Register.

Revenue Growth Drivers Net New Subscribers ARPU Growth • • • Mostly Domains & DIY services— efficiently sourced via online channel Average 1st year order: $100 (or ~ $8/month) Excellent future cross sell-upsell prospects • • • Primarily Value Added Services: eWorks/ Gorilla Marketing/ Facebook Boost/eCommerce Most via telesales into installed base BUT also adding new subscribers through Direct Response TV and Feet on the Street 12 .

00 $12.77 $13.89 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 Note: ARPU – Quarterly Non-GAAP subscription revenue divided by the average number of subscribers for the quarter divided by three months.00 $16.Consistent ARPU Growth $20.00 $13.15 $13.64 $16.00 $4.00 $0.00 $10. 13 .24 $16.00 $2.39 $15.73 $17.00 $8.49 $13.00 $15.34 $13.00 $18.00 $6.38 Monthly ARPU $14.

940.040.991.009.020.000 +18.000 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 14 .000 3.920.000 2.000 2.000 3.973.000 2.000 +18.Significant Subscriber Growth 3.000 2.000 2.000 3.000.000 2.959.030.980.000 3.000 +2.000 +14.000 2.000 +21.960.

0% 2009 2010 2011 2012 1Q 2013 Churn – Customer cancellations in the quarter divided by the sum of the number of subscribers at the beginning of the quarter and the gross number of new subscribers added during the quarter.Low Customer Churn Annual Average Monthly Churn 6.0% 4.0% 0.6% 3.0% 1. divided by three months 15 .0% 3.5% 1.0% 1.0% 5.0% 1.2% 2.0% 2.

0 $80.0 $70.0 $60.0 $80.4 $20. EBITDA Margin (%) 19% $54.0 $20.0 $2009 Adj.68 2010 $0.0 $140.59 16 .0 $10.3 $40.8 $120.1 $24.3 $18.0 $79.68 2011 $1.2 $20.05 2012 $1.0 $35.0 $60.0 $100.3 $18.0 $50.0 $40.Strong and Growing Profitability Adjusted EBITDA ($mm) ($mm) Non-GAAP Net Income & EPS $160.0 $30.0 $- 2010 18% 2011 23% 2012 29% 2009 Non-GAAP EPS ($) $0.0 $144.5 $90.

Investing in Beneficial Growth – Driving Cross Sell through Inbound/Outbound Telesales – Direct Response TV ads • Cost of acquisition stable.com Tour Title Sponsorship • Exceptional visibility with high quality brand • Unique opportunity to directly access small businesses in dozens of markets • 27 Small Business Forums being hosted in 2013 17 . including 8 new offices added in 1Q 2013 • Leads by Web. highest value product. targeting ~1 year payback – Web. investing more $$ • Branded DRTV commercials – Feet on the Street • 16 markets.

Improved Cost of Capital October 27. 2013 $660MM -$0$41MM $701MM Interest Rate 4.4% 18 .6% 4. 2011 First Lien Term Loan Second Lien Term Loan Revolving Credit Facility (drawn) Total debt balance $600MM $150MM $21MM $771MM Interest Rate 7% 11% ~5.5% March 31.5% Effective Interest Rate 7.5% ~3.

Long-Term Growth Targets Revenue growth Low teens revenue growth Long term Earnings growth Mid teens to 20% earnings growth Long term Revenue Non-GAAP Net Income 19 .

Appendix 20 .

except per share data) March 31.281 and $2.632 628. 2012.776 59.352 1.463) 161.270 21 .079 63. 2012 (audited) $ 13.990 4.587 16.657 $ 50 455.337. respectively Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders' equity Total liabilities and stockholders' equity December 31.348 40.092 5.258 1.389 12.883 $ 6.280 746 201.176 469. Consolidated Balance Sheets (in thousands.785 $ 49 454.140 64. net Other assets Total assets Liabilities and stockholders' equity Current liabilities: Accounts payable Accrued expenses Accrued compensation and benefits Accrued restructuring costs and other reserves Deferred revenue Current portion of debt Other liabilities Total current liabilities Deferred revenue Long-term debt Deferred tax liabilities Other long-term liabilities Total liabilities Stockholders' equity: Common stock.902 1.001 par value per share: 150.308.691 271.Balance Sheet Web.000. net Deferred expenses Goodwill Intangible assets.899 and 49. respectively Prepaid expenses Deferred expenses Deferred taxes Other current assets Total current assets Property and equipment.255 18.529 74.147 628.217 2.327. $0.984 119. net of allowance of $2.642 shares issued and outstanding at March 31.000 shares authorized.032 5.754 10.270 $ $ $ 7.487 183.692. 2013 and December 31.817 1.175.007 6.311 13.785 $ 15.181 15. 2013 (unaudited) Assets Current assets: Cash and cash equivalents Accounts receivable.174 42.966) 116.191. Inc.022 5 (292.581 1.176 452.413 1.126 4.697 59.703 6.149 4.681 2.477 191.385 11.165.556 233.327.786 62.816 688.308.562 15.223 175.577 657.417 5.com Group.613 1.781 4.804 14 (338. 49.116 119.193 40.

779) 12.680 (6.576) 1.039) 2.824) 3.com Group.500) 1.496) (4.045 2.133) (731) 17.085 668. 2013 2012 Cash flows from operating activities Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Loss from debt extinguishment Depreciation and amortization Stock based compensation Deferred income taxes Amortization of debt issuance costs and other Changes in operating assets and liabilities: Accounts receivable. Consolidated Statement of Cash Flows (in thousands.098) 460 2. except for per share amounts) (unaudited) Three months ended March 31. Inc.725 (2.605 14.040 6.594) 15.624) 39.183) (1.286 20.294) (1.786 11.364 12. end of period Supplemental cash flow information Interest paid Income tax (received) paid $ (46.136) (1.635 (31) $ $ 14.325 $ $ $ $ 15.322) (8.496) (2.602 — — (13.350 (2.Cash Flow Statement Web.958 (972) (8.747) (5.755 58 22 .365 14.217 577 (1.587 (86) (3. net Prepaid expenses and other assets Deferred expenses Accounts payable Accrued expenses and other liabilities Accrued compensation and benefits Accrued restructuring Deferred revenue Net cash provided by operating activities Cash flows from investing activities Capital expenditures Net cash used in investing activities Cash flows from financing activities Stock issuance costs Common stock repurchased Payments of long-term debt Proceeds from exercise of stock options Proceeds from long-term debt issued Debt issuance costs Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents.679 2.679) (2.033 — 19.039) 13.131) (1.199) (11.156) (3.181 13.503) $ (29. beginning of period Cash and cash equivalents.666) (669.823 (4.679) (2) (5.469 (11.

546 12.710 23 . Reconciliation of GAAP gross profit to non-GAAP gross profit GAAP gross profit Fair value adjustment to deferred revenue Fair value adjustment to deferred expense Stock based compensation Non-GAAP gross profit $ $ 2013 72.823 676 305 81.906 12.547 128.547 454 528 86. Inc. 2013 Reconciliation of GAAP revenue to non-GAAP revenue GAAP revenue Fair value adjustment to deferred revenue Non-GAAP revenue $ $ 115.435 $ $ 2012 52.093 $ $ 91.com Group. Reconciliation of GAAP to Non-GAAP Results (in thousands.823 119.514 27.337 2012 Three months ended March 31. except for per share data) (unaudited) Three months ended March 31.906 27.Reconciliation of GAAP to Non-GAAP Results Web.

536 — — 583 (286) 12.Reconciliation of GAAP to Non-GAAP Results Three months ended March 31.539) 912 334 3.547 454 19.365 14.286 (6) $ (29. 2013 Reconciliation of GAAP net loss to non-GAAP net income GAAP net loss Amortization of intangibles (Gain) loss on sale of assets $ (46.779) 17.680 (6.526 24.823 676 — 17.239 24 .502 $ 2.503) 17.692 402 2012 Stock based compensation Income tax expense (benefit) Restructuring charges Corporate development Amortization of deferred financing fees Cash income tax expense Fair value adjustment to deferred revenue Fair value adjustment to deferred expense Loss on debt extinguishment Non-GAAP net income $ 6.323 (285) 27.

279 1.134 681 50.01 0.01) 0.13 0.Reconciliation of GAAP to Non-GAAP Results Three months ended March 31.56 0.07 (0.01 — 0.97) 0.06 0. 2013 2012 Reconciliation of GAAP diluted net loss per share to non-GAAP diluted net income per share Diluted shares: Basic weighted average common shares Diluted stock options Diluted restricted stock Total diluted weighted average common shares Diluted GAAP net loss per share Diluted equity Amortization of intangibles (Gain) loss on sale of assets Stock based compensation Income tax expense (benefit) Restructuring charges Corporate development Amortization of deferred financing fees Cash income tax expense Fair value adjustment to deferred revenue Fair value adjustment to deferred expense Loss on debt extinguishment Diluted Non-GAAP net income per share $ 48.33 — 0.25 0.085 2.515 (0.900 (0.13) 0.05 (0.04 0.29 — — 0.096 49.38 0.140 2.48 $ 46.01 0.35 $ $ 25 .02 0.37 0.01 0.65) 0.01) 0.01 (0.

490) 20.964 26 . 2013 Reconciliation of GAAP operating loss to adjusted EBITDA GAAP operating loss Depreciation and amortization (Gain) loss on sale of assets Stock based compensation $ (2.680 2012 Restructuring charges Corporate development Fair value adjustment to deferred revenue Fair value adjustment to deferred expense Adjusted EBITDA $ — — 12.365 $ (18.040 (6) 6.910 $ 912 334 27.547 454 36.Reconciliation of GAAP to Non-GAAP Results Three months ended March 31.823 676 33.679 402 2.542) 19.

Reconciliation of GAAP to Non-GAAP Results Three months ended March 31. 2013 Reconciliation of GAAP operating margin to adjusted EBITDA margin GAAP operating margin Depreciation and amortization (Gain) loss on sale of assets Stock based compensation Restructuring charges Corporate development Fair value adjustment to deferred revenue Fair value adjustment to deferred expense Adjusted EBITDA margin 2012 (2)% 16 — 5 — — 10 — 29% (20)% 16 — 2 1 — 28 1 28% 27 .

365 $ $ $ $ 113.266 115.Reconciliation of GAAP to Non-GAAP Results Three months ended March 31.664 91.278 2.546 $ $ 2012 88.514 305 616 481 1.506 6.498 833 3.850 2.680 28 . 2013 Revenue Subscription Professional services and other Total Stock based compensation Cost of revenue Sales and marketing Research and development General and administration Total $ $ 528 1.280 2.

Reconciliation of Operating Cash Flow to Unlevered Free Cash Flow Operating cash flow Less: Capital expenditures Plus: Interest/prepayment penalties Unlevered free cash flow $ $ 2013 11.823 (2.496) 16.453 26.033 (4.679) 14.607 23.Reconciliation of GAAP to Non-GAAP Results Three months ended March 31.597 29 .144 $ $ 2012 14.