Prospectus Summary
You should read the following summary together with the more detailed information regarding our company and the common stock being sold in this offering, including the risk factors and our financial statements and related notes, included elsewhere in this prospectus.
Register.com, Inc.
Our Business
We are a provider of Internet domain name registration services worldwide. Domain names, such as mybrand.com, are the equivalent of addresses on the Internet and are registered through companies known as registrars. Domain names serve as part of the infrastructure for Internet communications and registering a domain name is one of the first steps for individuals and businesses seeking to establish an online identity. We believe that we offer a quick and user-friendly registration process and responsive and reliable customer support. We also offer a suite of value-added products and services targeted to assist our customers in developing and maintaining their online identities, including:
Products and Services Products and Services
Provided by Us Provided by Others
o domain name forwarding, which o email
allows customers to link their new
domain names to their existing o maintaining, storing and connecting
websites websites to the Internet, also
known as web hosting
o real-time domain name management,
which allows customers to view o submission of domain names to up
online and change, on an 400 search engines
instantaneous basis, domain name
information o monthly alerts of potentially
conflicting trademark and
o template-driven website-creation domain name activity around the
tools under the name FirstStepSite world, under the name Trademark
Guardian
Our goal is to become a one-stop resource through which our customers will establish, maintain and enhance their presence on the Internet.
In June 1999, we became the first registrar other than Network Solutions, Inc., a subsidiary of VeriSign, Inc., to register domain names in the .com, .net and .org domains directly on behalf of customers. For the six months ended June 30, 2000, we registered approximately 1.6 million domain names in these domains, representing an increase of 240% over the approximately 470,000 domain names we registered in these domains for the six months ended December 31, 1999.
We face a number of risks that you should consider before you decide to buy our common stock. These risks include, among other things, that our operating history is limited and our market is still in its early stages of development, that we have never been profitable and anticipate incurring additional losses in the foreseeable future and that our accumulated losses totaled $14.1 million as of June 30, 2000. In addition, we face substantial competition from Network Solutions in particular and in the industry in general. In response to competition in some of our market sectors, we anticipate reducing the prices we charge for products and services targeted to those sectors. Based on its press release dated July 26, 2000, Network Solutions registered approximately 2.1 million net new registrations in the .com, .net and .org domains for the three months ended June 30, 2000, representing approximately 38% of new registrations in these domains for the period. As of July 20, 2000, Network Solutions and 54 other registrars, not including us, were registering domain names in these domains. An additional 63 registrars have been accredited to register but are not yet registering domain names, and 10 registrars have qualified to register domain names but have not yet signed the agreements required for registering domain names, in the .com, .net and .org domains.
We derive our revenues from domain name registration fees, online products and services and advertising. Our net revenues increased from $2.3 million for the six months ended June 30, 1999 to $32.7 million for the six months ended June 30, 2000. Our cost of revenues increased from $325,000 for the six months ended June 30, 1999 to $9.4 million for the six months ended June 30, 2000. Our net loss decreased 62% from $5.2 million for the six months ended June 30, 1999 to $2.0 million for the six months ended June 30, 2000.
Market Opportunity
As a result of the growth of the Internet and the introduction of competition into the domain name registration industry, we believe there is great potential for growth in the market for domain name registrations. We also believe that this growth will be driven by individuals' and businesses' desire for an online identity and brand, as well as the need to promote products, services and events. We estimate that growth in global domain name registrations will accelerate over the next few years from over 20 million domain names registered through June 30, 2000 to approximately 140 million domain names by the end of 2003, based on our internal calculations.
Our Solution
Registration Services. Our core expertise is providing domain name registration services. Domain names are generally classified according to industry custom either as "generic" for the .com, .net, .org, .gov, .edu and .mil domains or as "country code" if they are associated with a particular country. In addition, the domain name system is organized according to industry custom by levels so that, for example, in the domain name mybrand.com, .com is the top level domain and mybrand is the second level domain. We register domain names in the .com, .net and .org generic domains and are able to register domain names in over 160 country code domains, of which 27 may currently be registered directly through our www.register.com website.
In addition, through a dedicated team of account managers, our Corporate Services department which targets the needs of corporate customers provides domain name registration and other services, such as multiple domain name registrations and registrar transfers, trademark monitoring and international brand protection.
Online Products and Services. We have assembled a suite of targeted products and services to assist our customers with their online identities, which we believe differentiates us from other registrars. For example, in June 2000, we acquired Inabox, Inc., a provider of template-driven website-creation tools. This product, which we market under the name FirstStepSite, provides our customers with an easy-to-use application to build their own websites.
Customer Service. Our customer support group seeks to provide dependable and timely resolution of customer inquiries, 24 hours per day, seven days per week. We manage and respond to customer inquiries through our internally developed Internet-based customer care tracking system which is complemented by our customer service phone system. We have teams of customer service representatives who specialize in key aspects of our business, and who are informed about our products, services and technology through our ongoing training.
Distribution. We believe that our direct and indirect distribution channels enable us to reach a broad range of potential customers with products and services targeted to their needs and to increase our exposure across the market. We provide our products and services directly to our customers through our www.register.com website as well as through our Corporate Services department. We also offer domain name registration services indirectly through our network of co-brand and private label websites, which include Internet service providers, also known as ISPs, web-hosting companies and other companies whose websites may appeal to our target customers. A co-brand network participant offers our domain name registration services through a website similar in appearance to our www.register.com website, but branded with the participant's and our logos. A customer typically accesses a co-brand website through the participant's home page. A co-brand website also typically provides links back to the participant's website to facilitate the sale of products and services by the participant. A private label network participant offers our domain name registration and other services through a website of its own design but the actual domain name registrations are processed through our systems. Private label websites may also include the language "powered by register.com." We recently introduced our Best SRS product through which we can provide our private label network participants with a domain name registration solution which is easier and less expensive to implement than our original private label product.
Our Strategy
Our objectives are to continue to increase our share of domain name registrations, to differentiate our products and services and to develop long-term relationships with our customers by helping them to establish, maintain and enhance their online presence. Our key strategies for achieving these objectives include:
o introducing new products and services, including the following that we anticipate introducing this year:
o account masking, to allow the domain name registrant to remain anonymous;
o a FirstStepSite product with e-commerce capabilities to be offered through our indirect distribution channel;
o enhancing awareness of our brand;
o extending our distribution channels;
o expanding our Corporate Services department;
o pursuing and integrating strategic acquisitions;
o offering names in additional domains; and o expanding internationally.
Our History
We were founded by Richard D. Forman, Peter A. Forman and Dan B. Levine as Forman Interactive Corp., a New York corporation, on November 23, 1994. Forman Interactive merged with and into Register.com, Inc., a Delaware corporation, on June 23, 1999. Our principal executive offices are located at 575 Eighth Avenue, 11th Floor, New York, New York 10018. Our telephone number at that location is (212) 798-9100. References in this prospectus to "Register.com," "we," "our" and "us" refer to Register.com, Inc. and Forman Interactive. We maintain a corporate website at www.register.com. The contents of our website are not part of this prospectus.
The Offering
Common stock offered by Register.com ...................... 500,000 shares Common stock offered by the selling stockholders .......... 3,500,000 shares Common stock to be outstanding after the offering ......... 32,490,420 shares Use of proceeds by Register.com ........................... We plan to use the proceeds from this offering for marketing, capital expenditures, working capital, development of new products and services, acquisitions, investments and general corporate purposes. Please see "Use of Proceeds." Nasdaq National Market symbol ............................. RCOM The foregoing information is based on 31,990,420 shares outstanding as of June 30, 2000. The total number of shares of common stock that we assume will be outstanding after the offering excludes:
o 5,866,027 shares of common stock issuable upon the exercise of stock options outstanding as of June 30, 2000, with a weighted average exercise price of $1.80 per share;
o 2,971,782 shares of common stock available for issuance under our stock option plans for options not yet granted;
o 350,000 shares reserved for issuance under our employee stock purchase plan; and o 5,894,067 shares of common stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $1.45 per share.
Unless otherwise noted, the information in this prospectus assumes no exercise of the underwriters' over-allotment option.
Our Summary Financial Data The following table summarizes financial data for our business. You should read the summary financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the notes to those financial statements included elsewhere in this prospectus.
Year Ended December 31, 1995 1996 1997 1998 1999 Statement of Operations Data: Net revenues .............. $ 87,696 $ 868,018 $ 713,263 $ 1,319,359 $ 9,644,552 Gross profit .............. 75,297 525,878 521,724 858,207 6,562,053 Operating expenses: Sales and marketing ..... 166,330 935,495 366,975 863,720 7,149,693 Research and development ............ 102,901 390,814 71,471 276,687 1,767,158 General and administrative (exclusive of non-cash compensation) .......... 94,704 743,609 263,017 795,425 2,380,190 Non-cash compensation ........... -- -- -- 149,682 4,929,200 Amortization of goodwill and other intangibles ............ -- -- -- -- -- Total operating expenses .............. 363,935 2,069,918 701,463 2,085,514 16,226,241 Net loss .................. $ (288,638) $ (1,714,076) $ (205,526) $ (1,160,748) $ (8,776,918) Basic and diluted net loss per share .......... $ (0.07) $ (0.26) $ (0.02) $ (0.07) $ (0.46) Weighted average common shares used in basic and diluted net loss per share ...... 4,429,859 6,633,905 8,884,709 15,697,013 19,117,027 Pro forma basic and diluted net loss per share ................... $ (0.40) Weighted average shares used in pro forma basic and diluted net loss per share ................... 22,112,252 Six Months Ended June 30, 1999 2000 Statement of Operations Data: Net revenues .............. $ 2,269,062 $ 32,667,756 Gross profit .............. 1,944,279 23,280,056 Operating expenses: Sales and marketing ..... 1,717,763 22,153,387 Research and development ............ 623,552 1,954,097 General and administrative (exclusive of non-cash compensation) .......... 402,325 3,342,079 Non-cash compensation ........... 4,530,815 1,290,093 Amortization of goodwill and other intangibles ............ -- 298,455 Total operating expenses .............. 7,274,455 29,038,111 Net loss .................. $ (5,247,003) $ (1,983,024) Basic and diluted net loss per share .......... $ (0.30) $ (0.07) Weighted average common shares used in basic and diluted net loss per share ...... 17,747,079 27,901,444 Pro forma basic and diluted net loss per share ................... $ (.07) Weighted average shares used in pro forma basic and diluted net loss per share ................... 29,526,406 The following table is a summary of our balance sheet at June 30, 2000. The as adjusted data reflect the sale of 500,000 shares of common stock offered by us hereby at an assumed public offering price of $30.75 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
June 30, 2000
Actual As Adjusted
Balance Sheet Data:
Cash and cash equivalents ......... $148,332,164 $162,488,414
Working capital ................... 144,869,444 159,025,694
Total assets ...................... 247,698,038 261,854,288
Total deferred revenue ............ 87,538,826 87,538,826
Total liabilities ................. 100,244,046 100,244,046
Stockholders' equity .............. 147,453,992 161,610,242