Website Pros Inc. (WWWW) filed Quarterly Report for the period ended 2009-09-30.
WEB.COM GROUP INC. is a leading provider of online marketing for small businesses. 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. Website Pros Inc. has a market cap of $181.9 million; its shares were traded at around $6.92 with a P/E ratio of 11.3 and P/S ratio of 1.5.
Highlight of Business Operations:
Professional Services Revenue. Professional services revenue increased 9% to $892 thousand in the three months ended September 30, 2009 from $822 thousand in the three months ended September 30, 2008. Professional services revenue increased approximately $479 thousand due to the additional service offerings of eCommerce store design that was recently acquired, which was offset by a decrease of $226 thousand and $158 thousand in search engine optimization services and custom design services, respectively.
Cost of Subscription Revenue. Cost of subscription revenue decreased 12% to $9.5 million in the three months ended September 30, 2009 from $10.8 million in the three months ended September 30, 2008. During the three months ended September 30, 2009, we reduced costs of approximately $1.3 million, which was driven by the decline of our subscription revenue and slightly offset by additional expense of $606 thousand due to the revenue associated with our recent acquisition. In addition, as a lesser percentage of our sales came from our strategic marketing relationships, fees related to these relationships decreased by $399 thousand during the three months ended September 30, 2009. Our gross margin on subscription revenue decreased slightly from 63% during the three months ended September 30, 2008 to 62% during the three months ended September 30, 2009.
Sales and Marketing Expenses. Sales and marketing expenses decreased 18% to $6.0 million, or 23% of total revenue, during the three months ended September 30, 2009 from $7.3 million, or 24% of total revenue, during the three months ended September 30, 2008. The decrease of $1.3 million in sales and marketing expenses was primarily the result of a reduction in sales resources, as well as, online marketing spend during the quarter. Specifically, we had reductions in employee compensation and benefits expense of $1.0 million and marketing and advertising expense of $457 thousand.
General and Administrative Expenses. General and administrative expenses decreased 10% to $4.1 million, or 16% of total revenue, during the three months ended September 30, 2009 from $4.6 million, or 15% of total revenue, during the three months ended September 30, 2008. During the three months ended September 30, 2009, we had reductions in employee compensation and benefits expense by $993 thousand, which were offset by additional expenses of $336 thousand as a result of our recent acquisition. In addition, due to the current market conditions, we continue to reduce our remaining general and administrative expenses.
Restructuring charges. Restructuring charges increased 2256% to $1.9 million, or 7% of total revenue, during the three months ended September 30, 2009 from $82 thousand, or less than 1% of total revenue, during the three months ended September 30, 2008. During the three months ended September 30, 2009, the Company recorded aggregate charges of $1.9 million for restructuring costs, which included $1.2 million of stock compensation expense. In connection with the completion of the integration of the Web.com acquisition from September 2007, the Company terminated certain employees and recorded related termination benefits, which increased restructuring charges.
Discontinued operations. On May 26, 2009, we sold our NetObjects Fusion software business for approximately $4.0 million. For the three months ended September 30, 2009 and 2008, the revenue generated by the NetObjects Fusion software business was $0 and $460 thousand and net income (loss) was $5 thousand and ($264) thousand, respectively.
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