Register.com, Inc. (Nasdaq:RCOM), a leading provider of global domain registration and Internet services, today reported a net loss for the quarter ended June 30, 2004 of $(384,000) or $(0.02) per share, compared to a loss of $(3.0) million, or $(0.07) per share, for the second quarter of 2003 and compared to net income of $1.1 million, or $0.04 per diluted share, for the first quarter of 2004. Loss from operations in the second quarter of 2004 was $(601,000), compared with a loss of $(4.7) million in the second quarter of 2003 and income from operations of $1.3 million in the first quarter of 2004.
According to Register.com, Net revenues for the second quarter of 2004 were $24.4 million, compared to net revenues of $26.2 million for the second quarter of 2003, and $25.9 million for the first quarter of 2004. The year-over-year decline in revenue resulted primarily from the Company’s strategic decision, made in the fourth quarter of 2003, to discontinue pursuing advertising revenue from parties who sell products and services that are potentially competitive with the Company’s recently introduced value added services. Second quarter 2004 revenue mix was as follows: 86% from domain name registrations, 13% from other products and services and 1% from advertising. This compares with a respective revenue mix of 86%, 9% and 5% in the second quarter of 2003 and 88%, 11% and 1% in the first quarter of 2004.
At the end of the second quarter of 2004, the Company’s deferred revenue balance was $89.8 million, representing a $1.1 million increase from the balance at the end of the first quarter of 2004. At the end of the second quarter of 2004, Register.com had $100.6 million in cash, short-term investments and marketable securities, representing a $4.2 million increase from the balance at the end of the first quarter of 2004. Cash flow from operations was $4.0 million in the second quarter of 2004, compared to $2.0 million in the second quarter of 2003 and $3.0 million in the first quarter of 2004.
Gross margin for the second quarter of 2004 was 68%, compared with 67% in the second quarter of 2003 and 68% in the first quarter of 2004. The year-over-year increase in gross margin was primarily due to increased sales of other products and services in the second quarter of 2004.
“I am pleased to see our sales of value added services continue to increase,” said Peter A. Forman, President and Chief Executive Officer of Register.com. “We are executing on our strategy to diversify our revenue through building broader relationships with our customers. At the same time, we continue to make solid advances on the systems improvements that will enable the Company to operate more efficiently in the future. Our strategic progress is evidenced in our increase in deferred revenue and cash flow from operations.”
The Company registered, transferred and renewed approximately 545,000 domain names in the second quarter of 2004. This compares to approximately 516,000 registrations in the second quarter of 2003, and approximately 580,000 registrations in the first quarter of 2004. Of the total registrations in the second quarter of 2004, approximately 224,000 were new and transferred registrations, and approximately 320,000 were renewals. As of June 30, 2004, Register.com had approximately 3.0 million domain names under management. The Company’s renewal rate for the twelve months ended June 30, 2004 was approximately 60%, up from 58% for the twelve months ended March 31, 2004.
General and administrative expense for the second quarter 2004 increased sequentially, primarily due to a $1.4 million provision for the Company’s portion of the settlement of a class-action lawsuit related to the Company’s SafeRenew program, offset in part by a $0.4 million gain on sale of a property. General and administrative expense for the second quarter of 2004 and 2003 includes $0.5 million and $0.6 million, respectively, to cover what the Company estimates to be the maximum potential credit card penalties that could be imposed for transactions occurring during those periods. As of June 30, 2004 the Company has accrued a total of $7.2 million for such potential penalties, which is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet.
Net loss per share for the second quarter of 2004 is based upon approximately 23.6 million shares outstanding. At the end of the second quarter of 2003, the Company had approximately 40.8 million shares outstanding. The reduction in share count was due to the Company’s $120 million self-tender offer completed in September 2003.
Register.com will hold a conference call at 4:30 p.m. ET today to discuss the Company’s second quarter results. The Company will also provide guidance on the conference call. The event will be webcast live on the Company’s investor website: http://investor.register.com. An audio archive will be available on the site beginning two hours after the call’s start time.