Web.com (WWWW) reported its earnings for announced results for the fourth quarter and full year ended December 31, 2012. on Friday and had investors buying shares of the company rose over 12% to $18.19

Fourth Quarter and Recent Business Highlights:

• Web.com’s total net subscribers were 3,009,000 at the end of the fourth quarter of 2012, an increase of 18,000 from the end of the third quarter.

• Web.com’s average revenue per user (ARPU) was $13.77 for the fourth quarter of 2012, representing a sequential increase of 2.1% from $13.49 in the third quarter of 2012 and growth of 7.1% from the $12.86 pro forma ARPU in the fourth quarter of 2011.

• Customer churn remained approximately 1% for the third quarter of 2012, consistent with the previous record low level.

Summary of Full Year 2012 Financial Results:

• Total revenue, calculated in accordance with GAAP, was $407.6 million for 2012, compared to $199.2 million for 2011.

• Non-GAAP revenue, which adds back the impact of the fair value adjustment to acquired deferred revenue, was $491.4 million for 2012, compared to $234.4 million in 2011.

• Operating loss, calculated in accordance with GAAP, was $36.0 million for 2012 and included an $86.1 million negative impact related to the fair value adjustment to acquired deferred revenue and deferred expenses as well as $3.1 million in restructuring charges and corporate development expenses. For 2011, the company reported a GAAP operating loss of $40.8 million, which included a $36.0 million negative impact from the fair value adjustment to acquired deferred revenue and deferred expenses as well as $22.6 million in restructuring charges and corporate development expenses.

• GAAP net loss from continuing operations was $122.2 million, or $2.61 per diluted share, for 2012 and included the above-mentioned impact related to the fair value adjustment to acquired deferred revenue and deferred expenses, restructuring charges and corporate development expenses, a $42.0 million loss related to the extinguishment of debt, and an income tax benefit of $16.7 million. GAAP net loss from continuing operations was $12.5 million, or $0.41 per diluted share, in 2011, which included the above-mentioned impact from the fair value adjustment to acquired deferred revenue and deferred expenses, restructuring charges and corporate development expenses, as well as a $50.1 million income tax benefit.

• Non-GAAP operating income was $135.9 million for 2012, compared to $50.2 million for 2011 and representing a record annual non-GAAP operating margin of 28%.

• Non-GAAP net income from continuing operations was $79.8 million for 2012, or $1.59 per diluted share, compared to $35.3 million, or $1.05 per diluted share for 2011

• Adjusted EBITDA was $144.5 million for 2012, compared to $54.2 million for 2011 and representing a record 29% annual adjusted EBITDA margin

• Cash flow from operations was $78.0 million for 2012 compared to $14.9 million for 2011.

Summary of Fourth Quarter 2012 Financial Results:

• Total revenue, calculated in accordance with U.S. generally accepted accounting principles (GAAP), was $111.4 million for the fourth quarter of 2012, compared to $73.6 million for the fourth quarter of 2011.

• Operating loss, calculated in accordance with GAAP, was $605 thousand for the fourth quarter of 2012 and included a $15.2 million negative impact related to the fair value adjustment to acquired deferred revenue and deferred expenses. For the fourth quarter of 2011, the company reported a GAAP operating loss of $32.8 million which included a $23.4 million negative impact from the fair value adjustment to acquired deferred revenue and deferred expenses, and $17.0 million of restructuring charges and corporate development expenses.

• GAAP net loss from continuing operations was $51.9 million, or $1.10 per diluted share, for the fourth quarter of 2012, and included the above-mentioned impact related to the fair value adjustment to acquired deferred revenue and deferred expenses, a $42.0 million charge related to the extinguishment of debt, and an income tax benefit of $4.7 million. GAAP net income from continuing operations was $669 thousand, or $0.02 per diluted share, in the fourth quarter of 2011, and included the above-mentioned impact related to acquired deferred revenue and deferred expenses, restructuring and corporate development expenses, as well as a $50.7 million tax benefit.

• Non-GAAP operating income was $35.0 million for the fourth quarter of 2012, compared to $23.2 million for the fourth quarter of 2011 and representing a non-GAAP operating margin of 28%.

• Non-GAAP net income from continuing operations was $22.7 million or $0.45 per diluted share for the fourth quarter of 2012, above the company’s guidance of $20.9 to $21.4 million or $0.41 to $0.42 per diluted share. The Company had non-GAAP net income of $12.2 million, or $0.28 per diluted share, for the fourth quarter of 2011.

• Adjusted EBITDA was $37.4 million for the fourth quarter of 2012, compared to $24.8 million for the fourth quarter of 2011 and representing a 30% adjusted EBITDA margin.

• The Company generated cash from operations of $26.6 million for the fourth quarter of 2012 compared to $4.5 million for the fourth quarter of 2011.

 

“2012 was a pivotal year for Web.com as our successful integration of Network Solutions has created a company with an annualized non-GAAP revenue run rate of more than $500 million, an accelerating revenue growth profile, and best-in-class profitability margins and strong cash flow from operations,” said David Brown, chairman and chief executive officer of Web.com.

The Company achieved a significant milestone by exceeding three million subscribers at year end.

Web.com’s pro forma revenue growth rate accelerated from the low single digits in 2011 to 7.2% in 2012. Also during the fourth quarter.

Mr. Brown added, “Our strategy of using our domain name business as a lead generation source and cross-sell opportunity for our broad suite of online marketing solutions is working.

We believe we are well-positioned to continue delivering consistent net subscriber growth, improving ARPU gains with new products and services, and best in class churn rates to meet our longer-term target of low-teens revenue growth, consistently high profitability margins and even faster growth in earnings through continued deleveraging.”