Web.com Group (WEB – Snapshot Report) is a leading provider of Internet services and online marketing solutions for small businesses across the U.S., United Kingdom and South America. Last week, the company reported fourth quarter revenue and profits that exceeded the high end of guidance.

The company added 22,000 subscribers to their 3.4 million base and management also announced the acquisition of Yodle, a leader in local digital marketing, for $344 million in an all cash transaction.

Web.com offers a full range of online services, including Internet marketing and advertising, local search, search engine marketing, search engine optimization, lead generation, home contractor specific leads, website design and publishing, logo and brand development, and eCommerce solutions, meeting the needs of small businesses anywhere along their lifecycle.

Solid Quarter, Key Acquisition

Web.com delivered its sixth consecutive earnings beat and raised its average beat for the past four quarters to 9.5%. Several analysts were in agreement that Q4 was a good example of management’s renewed focus on high-quality, value-added services (VAS) for small and medium-size businesses (SMB) helping them with “Web presence, engagement, and interaction” according to analysts at FBR Capital Markets.

Web.com highlighted these bullets regarding the Yodle purchase…

Significantly expands scale in value added digital marketing solutions increasing total revenue base by over 35%

Enhances long term growth profile

Adds complementary vertical market solutions, franchise specific products and cloud based office automation business applications

Over $30 million of projected synergies

And here’s what FBR had to say about the deal…

WEB should now enjoy even greater scale and be more valuable for its target SMB customers. On a pro forma basis, the combined companies would have generated $767M of revenue and $189M of EBITDA in 2015 versus stand-alone WEB at $559M and $156M. The amount of acquired subs is modest (~58,000), but its ~$300 monthly ARPU (average revenue per user) dwarfs WEB’s ~$14 ARPU. The greatest boost will be to WEB’s VAS focus, as VAS revenue should increase to 50% of the mix with Yodle in the fold (versus 31% stand-alone).

Print Friendly, PDF & Email