Web.com Group, Inc. (Nasdaq:WWWW), announced results for the fourth quarter and full year ended December 31, 2011 yesterday after the market closed.

Web.com owns Register.com and purchased NetworkSolutions.com last year.

Shares rose over 2% in aftermarket trading last night after the earnings were announced

Summary of Fourth Quarter 2011 Financial Results:

• Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $73.6 million for the fourth quarter of 2011, compared to $37.6 million for the fourth quarter of 2010. Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $96.5 million for the fourth quarter of 2011, above the company’s guidance range of $93.0 million to $95.0 million.
• Operating loss, calculated in accordance with GAAP, was $32.8 million for the fourth quarter of 2011 and included a $23.4 million negative impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees, and $17.0 million of restructuring charges and corporate development expenses. For the fourth quarter of 2010, the company reported a GAAP operating loss of $4.4 million which included a $7.6 million negative impact from the fair value adjustment to acquired deferred revenue and prepaid registry fees.
• GAAP net income from continuing operations was $3.6 million, or $0.08 per diluted share, for the fourth quarter of 2011, and included the above mentioned impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees, restructuring charges and corporate development expenses, and an income tax benefit of $53.7 million. GAAP net loss from continuing operations was $16.1 million, or $0.63 per diluted share, in the fourth quarter of 2010.
• Non-GAAP operating income was $23.2 million for the fourth quarter of 2011, compared to $8.6 million for the fourth quarter of 2010 and representing a record non-GAAP operating margin of 24%.
• Non-GAAP net income from continuing operations was $12.2 million for the fourth quarter of 2011, or $0.28 per diluted share, above the company’s guidance of $0.22 to $0.24 per diluted share. The Company had non-GAAP net income of $6.6 million, or $0.24 per diluted share, for the fourth quarter of 2010.
• Adjusted EBITDA was $24.8 million for the fourth quarter of 2011, compared to $9.1 million for the fourth quarter of 2010 and representing a record 26% adjusted EBITDA margin.
• The Company generated cash from operations of $4.5 million for the fourth quarter of 2011 and $13.4 million excluding the pay down of accrued restructuring expenses and certain expenses associated with the Network Solutions acquisition. This compared to $6.8 million and $8.0 million, excluding corporate development expenses associated with the Register.com acquisition, respectively, for the fourth quarter of 2010.

Fourth Quarter and Recent Business Highlights:

• Web.com’s average revenue per user (ARPU), excluding the contribution from Network Solutions, was $17.38 for the fourth quarter of 2011, representing a sequential increase of 4% from $16.73 in the third quarter of 2011 and up 13% over the prior year period. On a proforma basis and including the contribution from Network Solutions, ARPU was $12.86 for the fourth quarter of 2011.
• Web.com’s customer churn, excluding the contribution from Network Solutions, was 1.6% for the fourth quarter of 2011, representing a new record level and down from 1.7% in the prior two quarters. Customer churn was approximately 1% for the fourth quarter of 2011 including the contribution from Network Solutions.
• Web.com’s total net subscribers were approximately 2,957,000 at the end of the fourth quarter of 2011 due to the addition of Network Solutions’ subscriber base during the fourth quarter, and up from 913,000 subscribers at the end of the third quarter. The 2,957,000 subscriber level takes into account the overlap of approximately 40,000 shared customers between Web.com and Network Solutions.

Excluding the contribution from Network Solutions, Web.com saw a reduction of 4,800 subscribers in the fourth quarter. This represents a significant improvement compared to the loss of 13,000 subscribers sustained in the third quarter of 2011 and the loss of 20,000 subscribers per quarter experienced by Register.com prior to its acquisition by Web.com. Including the 5,700 subscribers Network Solutions lost during the partial quarter, the combined company lost 10,500 net subscribers in the period.

• After receiving Web.com shareholder approval, we successfully completed the acquisition of Network Solutions from NetSol Holdings LLC on October 27, 2011.
• Web.com reduced its highest-interest-cost, second lien debt by $30 million during the fourth quarter of 2011 using a combination of cash and $12 million from its lower-interest-cost revolving credit facility. The company also made a $5 million prepayment on its first lien loan in January 2012. Both repayments were in advance of the debt repayment schedule.

Summary of Full Year 2011 Financial Results:

• Total revenue, calculated in accordance with GAAP, was $199.2 million for 2011, compared to $120.3 million for 2010. Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $234.4 million for 2011, compared to $133.4 million in 2010.
• Operating loss, calculated in accordance with GAAP, was $40.8 million for 2011 and included a $36.0 million negative impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees as well as $22.6 million in restructuring charges and corporate development expenses. For 2010, the company reported GAAP operating loss of $14.5 million which included a $13.3 million negative impact from the fair value adjustment to acquired deferred revenue and prepaid registry fees, as well as $5.1 million in restructuring charges and corporate development expenses.
• GAAP net loss from continuing operations was $9.6 million, or $0.31 per diluted share, for 2011 and included the above mentioned impact related to the fair value adjustment to acquired deferred revenue and prepaid registry fees, restructuring charges and corporate development expenses, and a $53.0 million income tax benefit. GAAP net loss from continuing operations was $6.6 million, or $0.26 per diluted share, in 2010.
• Non-GAAP operating income was $50.2 million for 2011, compared to $21.4 million for 2010 and representing a record non-GAAP operating margin of 21%.
• Non-GAAP net income from continuing operations was $35.3 million for 2011, or $1.05 per diluted share, compared to $18.4 million, or $0.68 per diluted share for 2010.
• Adjusted EBITDA was $54.2 million for 2011, compared to $24.3 million for 2010 and representing a record 23% adjusted EBITDA margin.
• Cash flow from operations was $14.9 million for 2011 and $30.9 million excluding the pay down of accrued restructuring expenses, and certain expenses associated with the Network Solutions acquisition. This compared to $15.8 million and $21.5 million, excluding corporate development expenses for the Register.com acquisition, respectively, for 2010.

“Web.com delivered revenue and profitability that were above our expectations for the fourth quarter, representing a strong finish to a record year and a great start to Web.com’s future following the Network Solutions acquisition,” said David Brown, Chairman and CEO of Web.com. “During 2011, we completed the integration of Register.com and delivered on each of our key objectives, including accelerated revenue growth, ARPU expansion, reduced customer churn and strong profitability and cash flow generation.”

“We are excited about Web.com’s outlook as we begin 2012. By replicating integration and growth strategies that have been successful in the past, we are making excellent progress incorporating the Network Solutions organization, and are quite pleased with the contribution our joint teams are already making in just this short period of time. In addition to building on our track record of driving ARPU growth, we believe that we are well positioned to stabilize and grow our much larger subscriber base as we proceed through 2012. With far greater resources, we believe we have the opportunity to drive shareholder value as we use the combined company’s strong cash flow to invest in growth initiatives as well as rapidly de-lever our balance sheet.”