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Web.com Buying Local Ad Co. Yodle for $342M Which Is About 40% of Its Market Cap

Posted on the 12 February 2016 by Worldwide @thedomains

Web.com (NASDAQ:WEB) announced today it’s acquiring Yodle, a provider of local online ad/marketing services for 50K+ small businesses, for $300M in cash up-front + payments of $20M and $22M at the first and second anniversaries of the deal’s closing date.

Web.com closed today with an $826M market cap.

At a $342 Million dollar purchase price that represents over 40% of its market cap although like many stocks, the company is trading close to its 52 week low of $15.71 with a 52 week high of $26.04

Web.com stated the combined company would’ve had 2015 revenue of $767M, with Web.com having reported 2015 revenue of $543.5M.

Web.com also announced today its 4th Quarter and Full Year 2015 Financial Results today after the market closed.

David L. Brown, chairman, chief executive officer and president of Web.com is quoted as saying

“Web.com reported a strong finish to 2015, with fourth quarter financial results that exceeded expectations for both revenue and profitability.

Today’s announcement of the acquisition of Yodle is a great complement and natural extension of the success we had in 2015 towards our increased focus on value added digital marketing solutions. Our strategic focus on delivering value added, high touch solutions is a key contributor to our performance this quarter. We are pleased with the progress we have made towards our growth and margin objectives, and we are confident that our differentiated set of solutions for small businesses positions us well to deliver improved growth and performance going forward.”

Summary of Fourth Quarter 2015 Financial Results

Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $138.3 million for the fourth quarter of 2015, compared to $134.5 million for the fourth quarter of 2014. Non-GAAP revenue was $141.3 million for the fourth quarter of 2015, compared to $140.4 million in the year ago quarter, and above the high end of the company’s guidance range of $138.5 to $140.0 million.

GAAP operating income was $18.9 million for the fourth quarter of 2015, compared to $8.5 million for the fourth quarter of 2014. Non-GAAP operating income was $36.9 million for the fourth quarter of 2015, representing a 26% non-GAAP operating margin, compared to $33.4 million for the fourth quarter of 2014, representing a 24% non-GAAP operating margin.

GAAP net income was $77.0 million, or $1.48 per diluted share, for the fourth quarter of 2015. GAAP net loss was $8.7 million, or $0.17 per diluted share, in the fourth quarter of 2014. Non-GAAP net income was $34.2 million for the fourth quarter of 2015, or $0.66 per diluted share, which exceeded the high end of the company’s guidance of $0.62 to $0.64 per diluted share. The company had non-GAAP net income of $30.3 million, or $0.57 per diluted share, for the fourth quarter of 2014. GAAP net income in the fourth quarter of 2015 was favorably impacted by the release of certain valuation allowances on the company’s deferred tax assets resulting in the recognition of a large tax benefit in the quarter. Without the release of the valuation allowances, the fourth quarter tax provision would have been $6.1 million of expense. The release resulted in a benefit of $68.8 million, bringing the net tax benefit to $62.7 million, in the fourth quarter of 2015.

Adjusted EBITDA was $42.0 million for the fourth quarter of 2015, representing a 30% adjusted EBITDA margin, compared to $37.2 million for the fourth quarter of 2014, representing a 27% adjusted EBITDA margin.

The company generated cash from operations of $40.2 million for the fourth quarter of 2015, compared to $36.4 million of cash from operations for the fourth quarter of 2014.

Web.com’s total net subscribers were approximately 3,353,000 at the end of the fourth quarter of 2015, up approximately 22,000 from the end of the third quarter of 2015.

Web.com’s average revenue per user (ARPU) was $13.92 for the fourth quarter of 2015 compared to $14.07 for the fourth quarter of 2014. ARPU was up sequentially during the fourth quarter of 2015 from $13.90 for the third quarter of 2015.

Web.com’s trailing twelve month customer retention rate was 87.5% for the fourth quarter of 2015, consistent with recent levels of high customer retention.

Web.com used $27.8 million in cash to reduce debt during the fourth quarter of 2015.

Web.com repurchased 426,000 shares for $9.7 million in the fourth quarter of 2015.

Summary of Full Year 2015 Financial Results

Total revenue, calculated in accordance with GAAP, was $543.5 million for 2015, compared to $543.9 million for 2014. Non-GAAP revenue was $559.4 million for 2015, compared to $570.1 million in 2014.

GAAP operating income was $61.7 million for 2015 compared to $37.7 million for 2014. Non-GAAP operating income was $138.8 million for 2015, representing a 25% non-GAAP operating margin, compared to $147.8 million for 2014, representing a 26% non-GAAP operating margin.

GAAP net income was $90.0 million, or $1.72 per diluted share, for 2015. GAAP net loss was $12.5 million, or $0.24 per diluted share, in 2014. Non-GAAP net income was $127.6 million, or $2.43 per diluted share, for 2015 compared to $130.8 million, or $2.41 per diluted share, for 2014. GAAP net income for 2015 was favorably impacted by the release of certain valuation allowances on the company’s deferred tax assets resulting in the recognition of a large tax benefit in the fourth quarter. Without the release of the valuation allowances, the full year 2015 tax provision would have been $20.5 million of expense. The release resulted in a benefit of $68.8 million, bringing the net tax benefit to $48.3 million for the full year 2015.

Adjusted EBITDA was $155.8 million for 2015, compared to $161.9 million for 2014, representing a 28% adjusted EBITDA margin during each of the twelve months ended December 31, 2015 and 2014, respectively.

Cash from operations was $152.7 million for 2015 compared to $117.2 million for 2014.”

Shares of Web.com were up fractionally in after hours trading.


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