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Website Pros Inc. Reports Operating Results (10-Q)

November 05, 2010 | About:
Gordan Pape

10qk

18 followers
Website Pros Inc. (WWWW) filed Quarterly Report for the period ended 2010-09-30.

Website Pros Inc. has a market cap of $180.1 million; its shares were traded at around $6.69 with a P/E ratio of 16.8 and P/S ratio of 1.7. Website Pros Inc. had an annual average earning growth of 43.3% over the past 5 years.WWWW is in the portfolios of Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Total revenue for the three months ended September 30, 2010 increased $6.6 million, or 25%, primarily due to an $8.4 million increase from our third quarter acquisition of Register.com LP. Excluding Register.com LP, revenue declined $1.8 million primarily due to lower average revenue per subscriber as compared to the same period in the prior year, which was offset slightly by increased revenue from our Lead Generation and Solid Cactus businesses.

Subscription Revenue. Subscription revenue increased $6.9 million or 27% to $32.1 million in the three months ended September 30, 2010 from $25.2 million for the same prior year period. The increase is due to the $8.4 million of Register.com LP subscription revenue. Excluding the acquisition related increase, revenue declined by $1.6 million due to lower average revenue per subscriber as compared to the prior year, slightly offset by $0.5 million from an increase in the average number of customers during each period. The decrease in average revenue per subscriber was mainly due to the addition of lower revenue subscribers from our Do-It-Yourself website building and hosting products.

We acquired approximately 780,000 subscribers in connection with the Register.com LP acquisition. Net subscribers decreased by 17,468 customers during the three months ended September 30, 2010 as compared to an increase of 5,567 during the three months ended September 30, 2009. The average monthly turnover decreased to 1.7% during the three months ended September 30, 2010 from 3.4% during the three months ended September 30, 2009 due to the lower churn rate associated with the Register.com LP customers. The average revenue per subscriber was $20.11 during the three months ended September 30, 2010 from $31.12 during the three months ended September 30, 2009. Due to the current economic conditions and lower marketing spending partially offset by the contribution provided by Register.com LP, gross subscriber additions were up to 37,710 in the three months ended September 30, 2010 from 36,834 in the three months ended September 30, 2009. Reflecting the operations of Register.com LP for the full three month period ended September 30, 2010, we would have expected average revenue per subscriber in the range of $14, a decrease in net subscribers in the range of 21,000, and average monthly turnover in the range of 2%.

Professional Services Revenue. Professional services revenue decreased 24% to $674 thousand in the three months ended September 30, 2010 from $892 thousand in the three months ended September 30, 2009. Professional services revenue decreased primarily due to lower search engine optimization services and eCommerce store design services.

Cost of Subscription Revenue. Cost of subscription revenue increased $4.9 million to $14.4 million in the three months ended September 30, 2010 from $9.5 million in the three months ended September 30, 2009 due to an additional $5.5 million of costs from the Register.com LP acquisition. Our gross margin on subscription revenue decreased from 62% during the three months ended September 30, 2009 to 55% during the three months ended September 30, 2010 principally due to a shift in the subscription revenue mix to lower margin products including revenue subject to the unfavorable impact of deferred revenue recorded at fair market value from the Register.com LP acquisition. Furthermore, as we anticipate revenue growth in the future, we have chosen to maintain a certain level of capacity and not to reduce costs in proportion to the decrease in revenue.

Cost of Professional Services Revenue. Cost of professional services revenue decreased 17% to $519 thousand in the three months ended September 30, 2010 from $629 thousand during the prior year period. The decrease was primarily the result of lower revenue volume as well as a decline in employee compensation and benefits.

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