Web.com Swings To 3Q Profit; Shares Up As Co Pays Debt Early

Web.com Group Inc. (WWWW) swung to a third-quarter profit as revenue growth and a $21.2 million income-tax benefit related to its closing of the Register.com acquisition more than offset a decline in margins. Shares jumped 19% to $7.44 in after-hours trading, as the company’s bottom line excluding items easily topped expectations.

Chairman and Chief Executive David Brown said that during the third quarter, the company began to pay down debt related to the Register.com deal earlier than required. The company said it paid down about $6 million in debt during the quarter, several months ahead of deadlines.

Web.com acquired the privately held Web site designer and domain-name registration provider for $135 million in August, a deal it said would create cross-selling and cost-cutting opportunities. The company said the deal would form one of the largest online marketing and Web-services companies focused on serving small businesses. Web.com reported a profit of $12 million, or 45 cents a share, compared with a year-earlier loss of $1.6 million, or 6 cents a share. Excluding stock-based compensation, restructuring and other impacts, per-share earnings grew to 20 cents from 15 cents as total revenue jumped 25% to $32.7 million. In August, the company projected earnings of 13 cents to 14 cents per share on revenue of $37 million to $38 million, a view that topped Wall Street’s then expectations. Gross margin slid to 54.3% from 61.1%. Web.com’s total net subscribers were 974,000 at the end of the quarter, up sharply from 278,000 the previous quarter due to the addition of Register.com’s customer base. Customer churn was 1.7%, and would have been about 2% had Register.com’s performance been included for the full quarter. Both figures were below the 2.9% in the second quarter.

Source: DowJones Newswire