Three months ended 

Nine months ended

September 30,

September 30,

2014

2013

2014

2013

Domain name services

$

$

$

$

Aftermarket and other

Total revenue

$

$

$

$

Gain on other assets, net

$

$

$

$

Income (loss) before income taxes

$

$

$

$

Income tax benefit

Net income (loss)

$

$

$

$

Adjusted EBITDA (1)

$

$

$

$

(1)

This Non-GAAP financial measure is described below and reconciled to GAAP net income (loss) in the accompanying table.

·

Domain name services revenue for the three months ended September 30, 2014 increased 15% to $41.3 million compared to $36.0 million for the same period in 2013.  Organic growth of 10.5%, which excludes the acquisition related benefit from Name.com, was primarily due to an increase in domain name registrations associated with the continued onboarding of eNom wholesale partners.

·

Aftermarket and other revenue for the three months ended September 30, 2014 decreased to $7.4 million compared to $9.5 million for the same period in 2013, primarily due to a decrease in the sales of domain names owned by Rightside.  On a sequential quarterly basis, the Aftermarket business was consistent with and performed favorably as compared to the stabilized level of $7 million for each of the first two quarters of 2014.    

·

Total revenue for the three months ended September 30, 2014 increased 7% to $48.8 million compared to $45.5 million for the same period in 2013.

·

During the third quarter of 2014, Rightside recorded a gain on other assets, net of $8.6 million representing the gain on withdrawals of its interest in seven gTLD applications during the period.

·

During the third quarter of 2014, Rightside recorded an income tax benefit of $1.6 million resulting from taxable losses in the U.S. during the period. 

·

Net income for the three months ended September 30, 2014 was $4.1 million compared to a  net loss of $2.6 million for the same period in 2013. 

·

Adjusted EBITDA for the three months ended September 30, 2014 was ($0.6 million), compared to Adjusted EBITDA of $0.8 million for the same period in 2013. The change was primarily due to the decrease in Aftermarket and other revenue described above.    

·

Rightside has signed registry operator agreements with ICANN for 33 gTLDs to date, including four gTLDs added during the third quarter of 2014,  and has an interest in approximately 40 additional gTLD applications that have yet to be awarded to their ultimate registry operator.

·

Rightside Registry launched eight new gTLDs into “general availability” during the third quarter of 2014 and now has distribution agreements with over 90  leading registrars to distribute its gTLDs.

·

As of September 30, 2014, 15 of Rightside’s owned and operated gTLDs were in “general availability” for an average of just 89 days each, but had generated over 80,000 registrations with almost $2.5 million in total cash sales.

·

Rightside expects to have 28 gTLDs in “general availability” by year-end 2014.

·

With 16 million total domains under management as of September 30, 2014, including over 2 million domain names registered through its own retail outlets, Rightside remains one of the world’s largest registrars.

·

Rightside signed agreements with vertical industry partners to integrate its technology and distribute its gTLDs, expanding its reach in key markets like legal and music.

Three months ended 

September 30,

%

2014

2013

Change

End of period domains (1)

MM

MM

%

Average revenue per domain (2)

$

$

%

Renewal rate (3)

%

%

(1)

A domain is defined as an individual domain name registered by a third-party customer on Rightside’s registrar platforms for which Rightside has begun to recognize revenue. 

(2)

Average revenue per domain is calculated by dividing domain name services revenue for a period by the average number of domains registered on Rightside’s registrar platforms in that period.  Average revenue per domain for partial year periods is annualized.

(3)

The renewal rate is defined as the percentage of domain names on Rightside’s registrar platforms that are renewed after their original term expires.

·

As of September 30, 2014, Rightside had cash and cash equivalents of $50.9 million, compared to $26.1 million as of its spin-off from Demand Media, Inc. on August 1, 2014.

·

As of September 30, 2014, Rightside had $11 million of Letters of Credit outstanding under its $30 million revolving credit facility with Silicon Valley Bank, which was established on August 1, 2014 and matures in August 2017.

·

As of September 30, 2014, Rightside had fully drawn its $30 million term loan credit facility with certain funds managed by Tennenbaum Capital Partners, LLC, which was established on August 6, 2014 and matures in August 2019.

·

Total revenue of $188 million to $192 million for 2014 ($185 million to $195 million projected previously)

·

Adjusted EBITDA at break-even for the fourth quarter of 2014

·

Registry Services revenue in the low single-digit millions of dollars for 2014

·

Live conference call: 844-413-1777 (domestic) or 716-247-5761 (international)

·

Conference call replay available through November 13, 2014:  855-859-2056 (domestic) or    404-537-3406 (international)  

·

Conference ID:  24333779

·

Live and archived webcast:  http://investors.rightside.co 

Three months ended

Nine months ended

September 30,

September 30,

2014

2013

2014

2013

Revenue

$

$

$

$

Service costs

Sales and marketing

Product development

General and administrative

Amortization of intangible assets

Gain on other assets, net

Interest expense

 -

 -

Other expense (income), net

Income (loss) before income taxes

Income tax benefit

Net income (loss)

$

$

$

$

Net income (loss) per share attributable to common stockholders

Basic

$

$

$

$

Diluted

$

$

$

$

Weighted average shares used in computing net income (loss) per share

Basic

Diluted

September 30,

December 31,

2014

2013

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

$

Accounts receivable, net

Prepaid expenses and other current assets

Deferred registration costs

Total current assets

Deferred registration costs

Property and equipment, net

Intangible assets, net

Goodwill

Deferred tax assets

gTLD deposits

Other assets

Total assets

$

$

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

$

Accrued expenses and other current liabilities

Debt, current portion

 -

Deferred tax liabilities

Deferred revenue

Total current liabilities

Deferred revenue

Debt, less current portion

 -

Other liabilities

Total liabilities

Total stockholders' equity

Total liabilities and stockholders' equity

$

$

Nine months ended

September 30,

2014

2013

Net loss

$

$

Net cash provided by (used in) operating activities

$

$

Net cash used in investing activities

Net cash provided by (used in) financing activities

Change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$

$

Three months ended

Nine months ended

September 30,

September 30,

2014

2013

2014

2013

Net income (loss)

$

$

$

$

Add (deduct):

Income tax benefit

Gain on sale of marketable securities

 -

 -

 -

Gain on other assets, net (1)

Interest expense

 -

 -

Depreciation and amortization

Stock-based compensation

Acquisition and realignment costs (2)

 -

 -

Adjusted EBITDA

$

$

$

$

(1)

Net gains on withdrawals of interest in gTLD applications, included in gain on other assets, net.

(2)

Acquisition and realignment costs included employee severance and other payments attributable to acquisition or corporate realignment activities. Management does not consider these costs to be indicative of the Company's core operating results.