WSPI Website Pros (MM)

Website Pros, Inc. (Nasdaq: WSPI) -- Total Revenue Increases 32% to $12 Million -- Subscription Revenue Increases 31% to $10.7 Million -- Net New Subscribers Increase 74% to Approximately 3,100, Bringing Total Subscribers to Over 58,000 Website Pros, Inc. (Nasdaq: WSPI), a leading provider of Web services and online marketing for small and medium-sized businesses, today announced results of operations for the quarter ended June 30, 2006. David Brown, President and CEO of Website Pros, stated "We were pleased with the company's performance in the second quarter, which was highlighted by an acceleration in the sequential growth in our subscription revenue and better-than-expected profitability. We are encouraged by the continued early success of our new sales programs and the growing diversity of our partner channel." Brown added, "Demand for our comprehensive web services remains strong. We believe we continue to be uniquely positioned to help small and medium sized businesses realize the benefits of a high quality online presence and Internet marketing based on our domain expertise and hosted solutions that are low cost, quick to deploy and functionally robust." Financial Results for the Second Quarter of 2006 Total revenue for the second quarter of 2006 was $12.0 million, an increase of 32% on a year-over-year basis. For the second quarter of 2006, subscription revenue increased 31% to $10.7 million, license revenue increased 26% to $884 thousand, and professional services revenue increased 58% to $503 thousand, compared to the second quarter of 2005. For the second quarter of 2006, the Company reported net income, determined in accordance with generally accepted accounting principles (GAAP), of $1.4 million, an increase from a loss of $112 thousand in the second quarter of 2005. Fully diluted GAAP earnings per share was $0.07 for the second quarter of 2006, compared to a loss of $0.10 per share in the second quarter of 2005. Per share amounts are based on weighted average fully diluted shares of 19.3 million and 4.7 million for the second quarter of 2006 and 2005, respectively. Non-GAAP Financial Results for the Second Quarter of 2006 Website Pros reported non-GAAP net income of $1.9 million for the second quarter of 2006, as compared to $378 thousand in the second quarter of 2005. Non-GAAP diluted net income per share was $0.10 for the second quarter of 2006, an increase from $0.03 in the second quarter of 2005. All per share numbers for non-GAAP net income per share are expressed on a weighted average diluted share basis. Preferred dividends are excluded from non-GAAP net income per share in prior periods, as all outstanding shares of preferred stock were converted into shares of common stock and all related accrued dividends were eliminated in connection with the Company's initial public offering, which was completed on November 7, 2005. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in the press release. An explanation of these measures is also included below under the heading "Use of Non-GAAP Financial Measures." Kevin Carney, CFO of Website Pros, commented, "The strength of our second quarter results, and in particular our record non-GAAP profitability, demonstrates the scalability of our business model. For the first time in the company's history, our non-GAAP operating margin was greater than 10%. Our strong competitive position, value proposition and current momentum gives us confidence that we can continue increasing our profitability margins in 2006 and beyond." Other Quarterly Highlights The Company also had the following other financial and operating highlights for the quarter: -- The Company added approximately 3,100 net subscribers to its eWorks!XL, SmartClicks and Visibility Online services, increasing total subscribers to over 58,000 at the end of the quarter. -- The Company's monthly customer turnover remained at 5.6%, which was down from 6.4% in the second quarter of 2005. Trailing twelve month customer turnover reached a record low of 5.7% versus 6.3% in the second quarter of 2005. -- The Company continued to increase the diversification of its distribution model with the addition of Verio and CardService International as partners. Use of Non-GAAP Financial Measures Some of the measures in this press release are non-GAAP financial measures within the meaning of the SEC Regulation G. Website Pros believes presenting non-GAAP net income attributable to common stockholders and non-GAAP net income (loss) per share attributable to common stockholders and non-GAAP operating margin is useful to investors, because it describes the operating performance of the Company and helps investors gauge the Company's ability to generate cash flow, 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 to plan and forecast performance in future periods. The non-GAAP financial information Website Pros 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. Conference Call Information Management will host a conference call to discuss the Company's results and other matters related to the Company's business today, August 3, 2006 at 5:00 p.m. EST. To access this call, dial 800-822-4794 (domestic) or 913-981-4912 (international). A replay of this conference call will be available for a limited time at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 7541715. A live webcast of this conference call will also be available for a limited time on the "Investor Relations" page of the Company's Web site, www.websitepros.com. For more information, including this press release and Website Pros' Current Report on Form 8-K, any non-GAAP financial measures that may be discussed on the conference call as well as the most directly comparable GAAP financial measures and a reconciliation of the difference between the GAAP and any non-GAAP financial measures discussed on the conference call (other than non-GAAP financial measures discussed and reconciled in this news release), and any other material financial and other statistical information contained in the conference call , please visit the Investor Relations section of Website Pros' Website at www.websitepros.com. About Website Pros Website Pros, Inc. (Nasdaq: WSPI) is a leading provider of comprehensive Web services and products that enable small and medium-sized businesses to establish and maintain an effective Internet presence. We offer our customers a full range of Web services on an affordable subscription basis that include website design and publishing, Internet marketing and advertising, search engine optimization, search engine submission and lead generation. The breadth and flexibility of our products allow us to meet the Web services needs of a business anywhere along their lifecycle, ranging from businesses just establishing their websites to businesses requiring more sophisticated functionality or selling online. Through a unique combination of proprietary Web publishing and management software, automated workflow processes and specialized workforce development and management techniques, we achieve production efficiencies that enable us to offer sophisticated Web services affordably and effectively to our customers. Our technology automates many aspects of creating, maintaining, enhancing and marketing websites for our approximately 58,000 business customers. For more information, contact Website Pros. Voice: 904-680-6600. Fax: 904-880-0350. Address: 12735 Gran Bay Parkway West, #200, Jacksonville, FL 32258. Website: www.websitepros.com. Forward-Looking Statements This press release includes certain "forward-looking statements" 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 forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" 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 maintain our existing, and develop new, strategic relationships, the number of our net subscriber additions, our monthly customer turnover and those risks set forth under the caption "Risk Factors" in Website Pros' Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission. These filings are available on a Website maintained by the Securities and Exchange Commission at http://www.sec.gov. Website Pros does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise. -0- *T Website Pros, Inc. Consolidated Statement of Operations (in thousands except per share data) (unaudited) Three Months Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Revenue: Subscription $10,650 $8,107 $20,609 $14,150 License 884 701 2,089 1,673 Professional services 503 319 952 622 ------- ------- ------- ------- Total revenue 12,037 9,127 23,650 16,445 Cost of revenue (excluding depreciation and amortization shown separately below): Subscription (a) 4,669 3,785 9,087 6,708 License 191 172 482 369 Professional services 330 299 710 515 ------- ------- ------- ------- Total cost of revenue 5,190 4,256 10,279 7,592 ------- ------- ------- ------- Gross profit 6,847 4,871 13,371 8,853 Operating expenses: Sales and marketing (a) 2,971 2,457 5,810 4,441 Research and development (a) 441 429 989 791 General and administrative (a) 2,373 1,678 4,668 2,965 Depreciation and amortization 331 455 703 554 ------- ------- ------- ------- Total operating expenses 6,116 5,019 12,170 8,751 ------- ------- ------- ------- Income (loss) from operations 731 (148) 1,201 102 Other income (expense): Interest, net 626 36 1,177 62 Other - - - - ------- ------- ------- ------- Net income (loss) 1,357 (112) 2,378 164 Preferred Stock dividends - (340) - (680) ------- ------- ------- ------- Net income (loss) attributable to common stockholders $ 1,357 $ (452) $ 2,378 $ (516) ======= ======= ======= ======= Net income (loss) attributable per common share Basic $ 0.08 $(0.10) $ 0.14 $ (0.14) ======= ======= ======= ======= Diluted $ 0.07 $(0.10) $ 0.12 $ (0.14) ======= ======= ======= ======= Weighted-average number of shares used in per share amounts: Basic 16,613 4,714 16,570 3,758 ======= ======= ======= ======= Diluted 19,332 4,714 19,339 3,758 ======= ======= ======= ======= (a) Stock based compensation Subscription (cost of revenue) $ 32 $ 22 $ 57 $ 28 ======= ======= ======= ======= Sales and marketing $ 74 $ 63 $ 146 $ 76 Research and development 33 20 88 33 General and administration 273 47 516 57 ------- ------- ------- ------- Total $ 380 $ 130 $ 750 $ 166 ======= ======= ======= ======= Website, Pros, Inc. Consolidated Balance Sheets (in thousands except per share data) June 30, Dec. 31, 2006 2005 (unaudited) Assets Current assets: Cash and cash equivalents $ 57,002 $ 55,746 Accounts receivable, net of allowance $270 and $383, respectively 2,088 1,941 Inventories net of reserves of $8 and $51, respectively 120 138 Prepaid expenses 534 506 Prepaid marketing fees and other current assets 733 770 -------- -------- Total current assets 60,477 59,101 Property and equipment net 1,648 1,068 Goodwill and other intangible assets 15,756 16,105 Other assets 482 96 -------- -------- Total assets $ 78,363 $ 76,370 ======== ======== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 260 $ 1,280 Accrued expenses 2,143 2,391 Deferred revenue 3,220 3,193 Accrued marketing fees 334 297 Notes payable, current 67 65 Other liabilities 235 340 -------- -------- Total current liabilities 6,259 7,566 Accrued rent space 176 177 Notes payable, long term 207 241 Other long term liabilities 31 31 -------- -------- Total liabilities 6,673 8,015 Stockholders' equity Common stock, $0.001 par value; 150,000,000 shares authorized at June 30, 2006 and December 31,2005; 16,687,466 shares and 16,509,602 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively. 17 17 Additional paid-in capital 137,054 136,097 Accumulated deficit (65,381) (67,759) -------- -------- Total stockholders' equity 71,690 68,355 -------- -------- Total liabilities and stockholders' equity $ 78,363 $ 76,370 ======== ======== Website, Pros, Inc. Reconciliation of GAAP to Pro Forma Results (in thousands except per share data) (unaudited) Three Months Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Reconciliation of GAAP net income (loss) attributable to common stockholders to non-GAAP pro forma net income GAAP Net income $ 1,357 $ (112) $ 2,378 $ 164 Amortization of intangibles 176 338 418 338 Stock based compensation 412 152 807 194 ------- ------- ------- ------- Non-GAAP pro-forma net income $ 1,945 $ 378 $ 3,603 $ 696 ======= ======= ======= ======= Reconciliation of GAAP basic net income (loss) per share to non-GAAP pro forma net income per share GAAP net income (loss) per share attributable to common stockholders Basic $ 0.08 $ (0.10) $ 0.14 $ (0.14) Amortization of intangibles per share 0.01 0.07 0.03 0.09 Stock based compensation per share 0.03 0.03 0.05 0.05 Preferred stock dividends per share - 0.07 - 0.19 Preferred stock conversion - (0.04) - (0.12) ------- ------- ------- ------- Non-GAAP pro-forma net income per share attributable to common stockholders Basic $ 0.12 $ 0.03 $ 0.22 $ 0.07 ======= ======= ======= ======= Reconciliation of GAAP diluted net income (loss) per share to non-GAAP pro forma net income per share Fully diluted shares Common stock 16,613 4,714 16,570 3,758 Preferred stock - 6,325 - 6,221 Diluted stock options 2,469 2,234 2,503 2,219 Warrants 250 243 266 243 ------- ------- ------- ------- Total 19,332 13,516 19,339 12,441 ======= ======= ======= ======= GAAP net income (loss) per share attributable to common stockholders Diluted $ 0.07 $ (0.10) $ 0.12 $ (0.14) Amortization of intangibles per share 0.01 0.03 0.02 0.03 Stock based compensation per share 0.02 0.01 0.05 0.02 Preferred stock dividends per share - 0.03 - 0.05 Preferred stock conversion - 0.06 - 0.10 ------- ------- ------- ------- Non-GAAP pro-forma net income per share attributable to common stockholders Diluted $ 0.10 $ 0.03 $ 0.19 $ 0.06 ======= ======= ======= ======= Reconciliation of GAAP operating income (loss) to non-GAAP pro forma operating income (loss) GAAP operating income $ 731 $ (148) $ 1,201 $ 102 Amortization of intangibles 176 338 418 338 Stock based compensation 412 152 807 194 ------- ------- ------- ------- Non-GAAP proforma operating income $ 1,319 $ 342 $ 2,426 $ 634 ======= ======= ======= ======= Reconciliation of GAAP operating margin to non-GAAP pro forma operating margin GAAP operating margin 6% -2% 5% 1% Amortization of intangibles 1% 4% 2% 2% Stock based compensation 4% 2% 3% 1% ------- ------- ------- ------- Non-GAAP proforma operating margin 11% 4% 10% 4% ======= ======= ======= ======= Website, Pros, Inc. Consolidated Statement of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2006 2005 Cash flows from operating activities Net income $ 2,378 $ 164 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 703 554 Stock-based compensation expense 807 194 Changes in operating assets and liabilities: Accounts Receivable (147) (350) Inventories 18 26 Prepaid expenses and other assets (98) (71) Accounts Payable, accrued expenses and other liabilities (754) (36) Deferred revenue 27 342 ------- ------- Net cash provided by operating activities 2,934 823 Cash flows from investing activities Purchase of property and equipment (922) (166) Business acquisition, net of cash received - 382 ------- ------- Net cash used in investing activities (922) 216 Cash flows from financing activities Payment of stock issuance costs (877) (1,094) Payment of debt obligations (32) - Proceeds from issuance of preferred stock, net - 2,990 Proceeds from exercise of stock options 153 1 ------- ------- Net cash (used in) provided by financing activities (756) 1,897 ------- ------- Net increase in cash and cash equivalents 1,256 2,936 Cash and cash equivalents, beginning of period 55,746 6,621 ------- ------- Cash and cash equivalents, end of period $57,002 $ 9,557 ======= ======= *T