Web.com sees big business with small business clients

Posted Nov 4th 2009 10:20AM by Tom Taulli
Filed under: Earnings Reports, Small Business

Web.com's (NASDAQ: WWWW) small business customers have certainly suffered during the recession. Yet, the company has been able to deal with it. Then again, small businesses realize that they need a strong web presence, which is exactly Web.com's laser focus.

In Q3, the company posted revenues of $26.1 million, which was up a bit from the $25.5 million in the same period a year ago. Most of the revenue came from recurring subscriptions.

In fact, there are roughly 272,000 subscribers, up 5,600 from the prior quarter. This was the third consecutive quarter of sequential increases.

A critical part of Web.com's growth strategy is partnerships. For example, the company has expanded its relationship with Discover (NYSE: DFS) and has struck deals with Dun & Bradstreet (NYSE: DNB), Progressive Insurance, First Data and MerchantCircle (a rapidly growing small business community).

However, subscriber growth can be meaningless if the churn rate is high. To this end, Web.com has been working hard to lower attrition of its customers and as a result the churn rate a record low at 3.4%, down from 3.9% in Q1. While this number can be volatile, it appears that Web.com is getting lots of traction.

Going forward, Web.com projects revenues of $25.5 million to $26.5 million for Q4, with non-GAAP net income of $0.14 to $0.16 per share.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: dfs, dnb, inthenews, Web.com, wwww