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8-K - 8-K - Endurance International Group Holdings, Inc.d844489d8k.htm

Exhibit 99.1

 

LOGO

Endurance International Group Reports 2019 Fourth Quarter

and Full Year Results

Fourth Quarter 2019

 

   

GAAP revenue of $277.2 million

 

   

Net income of $9.6 million

 

   

Adjusted EBITDA of $78.2 million

 

   

Cash flow from operations of $46.3 million

 

   

Free cash flow of $32.1 million

Fiscal Year 2019

 

   

GAAP revenue of $1.113 billion

 

   

Net loss of $12.3 million

 

   

Adjusted EBITDA of $313.6 million

 

   

Cash flow from operations of $162.0 million

 

   

Free cash flow of $114.7 million

 

   

Total subscribers on platform were approximately 4.766 million at December 31, 2019

BURLINGTON, MA (February 6, 2020) — Endurance International Group Holdings, Inc. (Nasdaq: EIGI), a leading provider of cloud-based platform solutions designed to help small and medium-sized businesses succeed online, today reported financial results for its fourth quarter and fiscal year ended December 31, 2019.

“Our focus on our core strategic brands and investing to increase the value we deliver to our customers resulted in continued financial progress in the fourth quarter,” commented Jeffrey H. Fox, president and chief executive officer at Endurance International Group. “After adjusting for the impact of the sale of our SinglePlatform business, we had positive net adds and our year over year revenue continued to progress toward inflection. The team is focused on returning the company to growth, and we believe our revenue and subscriber trends reflect the substantial progress we have made in 2019.”


Fourth Quarter and Full Year 2019 Financial Highlights

As previously disclosed, the company completed the sale of SinglePlatform on December 5, 2019. For comparative purposes, selected figures represented below do not adjust for the sale of SinglePlatform unless noted.

 

   

Revenue for the fourth quarter of 2019 was $277.2 million, a decrease of 2 percent compared to $282.4 million in the fourth quarter of 2018.    Excluding the impact of SinglePlatform for both periods, revenue was $272.4 million compared to $275.1 million in the fourth quarter of 2018, a year over year decrease of 1 percent.

 

   

Revenue for fiscal year 2019 was $1.113 billion, a decrease of 3 percent compared to $1.145 billion in fiscal year 2018. Excluding the impact of SinglePlatform for both periods, fiscal 2019 revenue was $1.088 billion compared to $1.117 billion in fiscal 2018, a year over year decrease of 3 percent.

 

   

Net income attributable to Endurance International Group Holdings, Inc. for the fourth quarter of 2019 was $9.6 million, or $0.07 per diluted share, compared to net income of $12.8 million, or $0.09 per diluted share, for the fourth quarter of 2018. For fiscal year 2019, net loss attributable to Endurance International Group Holdings, Inc. was $12.3 million, or $(0.09) per diluted share, compared to a net income of $4.5 million, or $0.03 per diluted share, for fiscal year 2018.

 

   

Adjusted EBITDA for the fourth quarter of 2019 was $78.2 million, a decrease of 1 percent compared to $79.3 million in the fourth quarter of 2018. Adjusted EBITDA for fiscal year 2019 was $313.6 million, a decrease of 7 percent compared to $338.1 million in fiscal year 2018.

 

   

Cash flow from operations for the fourth quarter of 2019 was $46.3 million, a decrease of 5 percent compared to $49.0 million for the fourth quarter of 2018. Cash flow from operations for fiscal year 2019 was $162.0 million, a decrease of 11 percent compared to $182.6 million for fiscal year 2018.

 

   

Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment obligations, for the fourth quarter of 2019 was $32.1 million, an increase of 36 percent compared to $23.6 million for the fourth quarter of 2018. Free cash flow for fiscal year 2019 was $114.7 million, a decrease of 11 percent compared to $129.2 million in fiscal year 2018.

 

   

During fiscal year 2019, the company reduced the balance of its term loan by $131.0 million.

Full Year and Fourth Quarter Operating Highlights

 

   

Total subscribers on platform at December 31, 2019 were approximately 4.766 million, compared to approximately 4.780 million subscribers at September 30, 2019 and 4.802 million subscribers at December 31, 2018. As a result of the SinglePlatform disposition in December 2019, total subscriber count was reduced by approximately 23,000 subscribers. See “Total Subscribers” below.

 

   

Average revenue per subscriber, or ARPS, for the fourth quarter of 2019 was $19.34, compared to $19.50 for the fourth quarter of 2018. ARPS for fiscal year 2019 was $19.35, compared to $19.37 for fiscal year 2018.

 

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Fiscal 2020 Guidance

The company is providing the following guidance as of the date of this release, February 6, 2020. For the full year ending December 31, 2020, the company expects:

 

     2019 Actual
As Reported
     2019 Adjusted for
SinglePlatform Sale*
     2020 Guidance
(as of February 6, 2020)
 

GAAP revenue

   $ 1.113 billion      $ 1.088 billion        $1.085 to $1.110 billion  

Adjusted EBITDA

   $ 314 million      $ 310 million        approx. $ 300 million  

In addition, the company expects cash flow from operations of approximately $160 million and free cash flow of approximately $110 million.

 

*

As previously disclosed, the company sold its SinglePlatform business on December 5, 2019. These figures represent 2019 revenue and adjusted EBITDA as if the company had sold this business prior to January 1, 2019. From January 1, 2019 until the sale date, the SinglePlatform business contributed approximately $25.4 million in GAAP revenue and $4.0 million in adjusted EBITDA (excluding the impact of corporate cost allocations).

Adjusted EBITDA and free cash flow are non-GAAP financial measures. The company is unable to reconcile adjusted EBITDA guidance to GAAP without unreasonable efforts, as further discussed below in “Non-GAAP Financial Measures.” A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP for past periods, as well as a reconciliation of free cash flow guidance to operating cash flow, is provided in the financial statement tables included at the end of this press release.

Conference Call and Webcast Information

Endurance International Group’s fourth quarter and full year 2019 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EST on Thursday, February 6, 2020. To participate on the live call, analysts and investors should dial (888) 734-0328 at least ten minutes prior to the call. Endurance International Group will also offer a live and archived webcast of the conference call, accessible from the Investor Relations section of the company’s website at http://ir.endurance.com.

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, we use adjusted EBITDA and free cash flow, which are non-GAAP financial measures, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions. In this press release, we are also presenting the following additional non-GAAP financial measures for fiscal year 2019: revenue - excluding SinglePlatform and adjusted EBITDA - excluding SinglePlatform. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP or includes amounts that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.

 

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Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. For example, adjusted EBITDA excludes interest expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business. The presentation of non-GAAP financial information is not meant to be considered in isolation from, or as a substitute for, the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the additional information about adjusted EBITDA and free cash flow shown below, including the reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Revenue - excluding SinglePlatform is a non-GAAP financial measure that we calculate as revenue excluding revenue contributed by our SinglePlatform business, which we sold on December 5, 2019. We believe that this measure helps investors evaluate and compare our past performance excluding the impact of a non-core business that we have sold.

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, gain on sale of business, (gain) loss of unconsolidated entities, impairment of goodwill and other long-lived assets, SEC investigations reserve, and shareholder litigation reserve. We view adjusted EBITDA as a performance measure and believe it helps investors evaluate and compare our core operating performance from period to period.

Adjusted EBITDA - excluding SinglePlatform is a non-GAAP financial measure that we calculate as adjusted EBITDA less adjusted EBITDA contributed by our SinglePlatform business, which we sold on December 5, 2019. Adjusted EBITDA contributed by our SinglePlatform business excludes the impact of corporate costs that we had allocated to SinglePlatform, since we will continue to incur these costs following the sale. We believe that this measure helps investors evaluate and compare our past performance excluding the impact of a non-core business that we have sold.

Free Cash Flow, or FCF, is a non-GAAP financial measure that we calculate as cash flow from operations less capital expenditures and financed equipment. We believe that FCF provides investors with an indicator of our ability to generate positive cash flows after meeting our obligations with regard to capital expenditures (including financed equipment).

 

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Fiscal 2020 guidance included in this press release includes forward-looking guidance for adjusted EBITDA and FCF. A reconciliation of FCF guidance to cash flow from operations is included below. We are unable to reconcile our adjusted EBITDA guidance to net (loss) income because certain information necessary for this reconciliation is not available without unreasonable efforts since it is difficult to predict and/or dependent on future events that are outside of our control. In particular, we are unable to provide reasonable predictions of the following reconciling items: income tax expense (benefit), transaction expenses and charges, and impairment of goodwill and other long-lived assets. These items are difficult to predict with a reasonable degree of accuracy because of unanticipated changes in our GAAP effective income tax rate, a primary contributor to net income; uncertain or unanticipated acquisition costs; and unanticipated charges related to asset impairments. The impact of these items, in the aggregate, could be significant. With respect to the other reconciling items, as of the date of this press release, we expect the following for 2020 (all amounts are estimated, approximate, and subject to change): interest expense (net) of $130 million, depreciation expense of $46 million, amortization expense for other intangible assets of $72 million, and stock-based compensation expense of $30 million. At this time, we do not expect expenses in 2020 for the remaining reconciling items. These forward-looking estimates of reconciling items may different materially from our actual results and should not be relied upon as statements of fact.

Key Operating Metrics

Total Subscribers - We define total subscribers as the approximate number of subscribers that, as of the end of a period, are identified as subscribing directly to our products on a paid basis, excluding accounts that access our solutions via resellers or that purchase only domain names from us. Subscribers of more than one brand, and subscribers with more than one distinct billing relationship or subscription with us, are counted as separate subscribers. Total subscribers for a period reflects adjustments to add or subtract subscribers as we integrate acquisitions and/or are otherwise able to identify subscribers that meet, or do not meet, this definition of total subscribers. There were no adjustments in the fourth quarter of 2019.

Average Revenue Per Subscriber (ARPS) - We calculate ARPS as the amount of revenue we recognize in a period, including marketing development funds and other revenue not received from subscribers, divided by the average of the number of total subscribers at the beginning of the period and at the end of the period, which we refer to as average subscribers for the period, divided by the number of months in the period. See definition of “Total Subscribers” above. ARPS does not represent an exact measure of the average amount a subscriber spends with us each month, since our calculation of ARPS is impacted by revenues generated by non-subscribers.

Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our financial guidance for fiscal year 2020 and statements reflecting the expectation that we will return to year over year revenue growth in future periods. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not

 

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historical facts, and statements identified by words such as “expects,” “believes,” “estimates,” “may,” “continue,” “positions,” “confident,” and variations of such words or words of similar meaning and the use of future dates. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that these plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: the possibility that our financial guidance may differ from expectations; the possibility that our planned investment initiatives will not result in the anticipated benefits to our business; the possibility that we will continue to experience decreases in our subscriber base; an adverse impact on our business from litigation or regulatory proceedings or commercial disputes; an adverse impact on our business from our substantial indebtedness and the cost of servicing our debt; the rate of growth of the Small and Medium Business (“SMB”) market for our solutions; our inability to grow our subscriber base, increase sales to our existing subscribers, or retain our existing subscribers; system or Internet failures; our inability to maintain or improve our competitive position or market share; and other risks and uncertainties discussed in our filings with the SEC, including those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2018 filed with the SEC on February 21, 2019 and other reports we file with the SEC.

We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

About Endurance International Group

Endurance International Group Holdings, Inc. (Nasdaq:EIGI) helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, Domain.com and SiteBuilder, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,700 people across the United States, Brazil, India and the Netherlands. For more information, visit: www.endurance.com.

Endurance International Group and the compass logo are trademarks of The Endurance International Group, Inc. Constant Contact, the Constant Contact logo and other brand names of Endurance International Group are trademarks of The Endurance International Group, Inc. or its subsidiaries.

 

Investor Contact:

Angela White

Endurance International Group

(781) 852-3450

ir@endurance.com

  

Press Contact:

Kristen Andrews

Endurance International Group

(781) 418-6716

press@endurance.com

 

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Endurance International Group Holdings, Inc.

Consolidated Balance Sheets

(unaudited) (in thousands, except share and per share amounts)

 

     December 31,
2018
    December 31,
2019
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 88,644     $ 111,265  

Restricted cash

     1,932       1,732  

Accounts receivable

     12,205       10,224  

Prepaid domain name registry fees

     56,779       55,237  

Prepaid commissions

     41,458       38,435  

Prepaid and refundable taxes

     7,235       6,810  

Prepaid expenses and other current assets

     27,855       23,883  
  

 

 

   

 

 

 

Total current assets

     236,108       247,586  

Property and equipment—net

     92,275       85,925  

Operating lease right-of-use assets

     —         90,519  

Goodwill

     1,849,065       1,835,310  

Other intangible assets—net

     352,516       245,002  

Deferred financing costs—net

     2,656       1,778  

Investments

     15,000       15,000  

Prepaid domain name registry fees, net of current portion

     11,207       11,107  

Prepaid commissions, net of current portion

     42,472       48,780  

Deferred tax asset

     —         64  

Other assets

     5,208       3,015  
  

 

 

   

 

 

 

Total assets

   $ 2,606,507     $ 2,584,086  
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

     12,449       10,054  

Accrued expenses

     79,279       64,560  

Accrued taxes

     2,498       251  

Accrued interest

     25,259       23,434  

Deferred revenue

     371,758       369,475  

Operating lease liabilities—short term

     —         21,193  

Current portion of notes payable

     31,606       31,606  

Current portion of financed equipment

     8,379       790  

Deferred consideration—short term

     2,425       2,201  

Other current liabilities

     3,147       2,165  
  

 

 

   

 

 

 

Total current liabilities

     536,800       525,729  

Long-term deferred revenue

     96,140       99,652  

Operating lease liabilities—long term

     —         78,151  

Notes payable—long term, net of original issue discounts of $21,349 and $16,859, and deferred financing costs of $31,992 and $25,690, respectively

     1,770,055       1,649,867  

Deferred tax liability

     16,457       27,097  

Deferred consideration—long term

     1,364       —    

Other liabilities

     11,237       6,636  
  

 

 

   

 

 

 

Total liabilities

     2,432,053       2,387,132  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Preferred Stock—par value $0.0001; 5,000,000 shares authorized; no shares issued or outstanding

     —         —    

Common Stock—par value $0.0001; 500,000,000 shares authorized; 143,444,515 and 146,259,868 shares issued at December 31, 2018 and December 31, 2019, respectively; 143,444,178 and 146,259,868 outstanding at December 31, 2018 and December 31, 2019, respectively

     14       15  

Additional paid-in capital

     961,235       996,958  

Accumulated other comprehensive loss

     (3,211     (4,088

Accumulated deficit

     (783,584     (795,931
  

 

 

   

 

 

 

Total stockholders’ equity

     174,454       196,954  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,606,507     $ 2,584,086  
  

 

 

   

 

 

 

 

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Endurance International Group Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

(in thousands, except share and per share amounts)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2018     2019     2018     2019  

Revenue

   $ 282,395     $ 277,198     $ 1,145,291     $ 1,113,278  

Cost of revenue (including impairment of $7,315 and $25,207, respectively, for the three and twelve months ended December 31, 2019)

     127,140       126,100       520,737       510,296  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     155,255       151,098       624,554       602,982  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expense:

        

Sales and marketing

     67,691       66,798       265,424       258,019  

Engineering and development

     23,421       29,078       87,980       106,377  

General and administrative

     28,992       25,141       124,204       117,967  

Gain on sale of business

     —         (40,700     —         (40,700

Impairment of goodwill

     —         12,333       —         12,333  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     120,104       92,650       477,608       453,996  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     35,151       58,448       146,946       148,986  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     369       312       1,089       1,222  

Interest expense

     (37,557     (34,368     (149,480     (144,676
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other (expense) income—net

     (37,188     (34,056     (148,391     (143,454
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes and equity earnings of unconsolidated entities

     (2,037     24,392       (1,445     5,532  

Income tax (benefit) expense

     (15,072     14,839       (6,246     17,879  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity earnings of unconsolidated entities

     13,035       9,553       4,801       (12,347
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity loss of unconsolidated entities, net of tax

     265       —         267       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 12,770     $ 9,553     $ 4,534     $ (12,347
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Endurance International Group Holdings, Inc.

   $ 12,770     $ 9,553     $ 4,534     $ (12,347
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss):

        

Foreign currency translation adjustments

     256       456       (2,233     (598

Unrealized (loss) gain on cash flow hedge, net of taxes of ($763) and ($98) for the three months ended December 31, 2018 and 2019, respectively and ($137) and $102 for the twelve months ended December 31, 2018 and 2019, respectively

     (2,433     332       (437     (279
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ 10,593     $ 10,341     $ 1,864     $ (13,224
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Endurance International Group Holdings, Inc.—basic

   $ 0.09     $ 0.07     $ 0.03     $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Endurance International Group Holdings, Inc.—diluted

   $ 0.09     $ 0.07     $ 0.03     $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average number of common shares used in computing net income (loss) per share attributable to Endurance International Group Holdings, Inc.—basic

     143,415,944       146,231,482       142,316,993       145,259,691  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average number of common shares used in computing net income (loss) per share attributable to Endurance International Group Holdings, Inc.—diluted

     145,228,986       146,426,817       145,669,760       145,259,691  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Endurance International Group Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2018     2019     2018     2019  

Cash flows from operating activities:

        

Net income (loss)

   $ 12,770     $ 9,553     $ 4,534     $ (12,347

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation of property and equipment

     11,454       11,566       48,207       44,951  

Amortization of other intangible assets from acquisitions

     25,258       21,046       103,148       85,183  

Amortization of deferred financing costs

     1,746       1,848       6,454       7,179  

Amortization of net present value of deferred consideration

     62       20       373       163  

Amortization of original issuance discount

     1,096       1,154       4,305       4,490  

Impairment of long-lived assets

     —         7,315       —         25,207  

Impairment of goodwill

     —         12,333       —         12,333  

Stock-based compensation

     7,132       8,179       29,064       35,692  

Deferred tax (benefit) expense

     (19,277     8,727       (10,438     10,669  

Gain on sale of business

     —         (40,700     —         (40,700

Loss on sale of assets

     7       35       198       163  

Loss of unconsolidated entities

     265       —         267       —    

Financing costs expensed

     —         —         1,228       —    

Loss on early extinguishment of debt

     —         —         331       —    

Changes in operating assets and liabilities, net of acquisitions and divestitures:

        

Accounts receivable

     1,929       1,951       3,616       1,985  

Prepaid and refundable taxes

     550       6,403       (2,896     495  

Prepaid expenses and other current assets

     (7,267     (1,251     (4,564     3,857  

Leases right-of-use asset, net

     —         261       —         656  

Accounts payable and accrued expenses

     23,051       1,927       5,040       (21,565

Deferred revenue

     (9,817     (4,074     (6,315     3,562  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     48,959       46,293       182,552       161,973  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Businesses acquired in purchase transaction, net of cash acquired

     —         —         —         (8,875

Purchases of property and equipment

     (23,537     (12,330     (45,880     (39,126

Proceeds from sale of assets

     —         51,000       6       51,001  

Purchases of intangible assets

     (8     —         (8     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (23,545     38,670       (45,882     3,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from issuance of term loan

     —         —         1,580,305       —    

Repayment of term loan

     (25,000     (55,980     (1,681,094     (130,980

Payment of financing costs

     —         —         (1,580     —    

Payment of deferred consideration

     —         —         (4,500     (2,500

Principal payments on financed equipment

     (1,830     (1,857     (7,439     (8,189

Proceeds from exercise of stock options

     131       5       887       31  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (26,699     (57,832     (113,421     (141,638
  

 

 

   

 

 

   

 

 

   

 

 

 

Net effect of exchange rate on cash and cash equivalents and restricted cash

     355       (431     (1,791     (914
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents and restricted cash

     (930     26,700       21,458       22,421  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents and restricted cash:

        

Beginning of period

     91,506       86,297       69,118       90,576  
  

 

 

   

 

 

   

 

 

   

 

 

 

End of period

   $ 90,576     $ 112,997     $ 90,576     $ 112,997  
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental cash flow information:

        

Interest paid

   $ 24,006     $ 21,920     $ 134,145     $ 132,805  

Income taxes paid

   $ 416     $ 3,014     $ 4,141     $ 4,728  

Supplemental disclosure of non-cash financing activities:

        

Assets acquired under equipment financing

   $ 1,179     $ —       $ 1,179     $ —    

 

9


GAAP to Non-GAAP reconciliation - Adjusted EBITDA

The following table presents a reconciliation of net income (loss) calculated in accordance with GAAP to adjusted EBITDA:

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2019      2018      2019  
     (in thousands)  

Net income (loss)

   $ 12,770      $ 9,553      $ 4,534      $ (12,347

Interest expensenet(1)

     37,188        34,056        148,391        143,454  

Income tax (benefit) expense

     (15,072      14,839        (6,246      17,879  

Depreciation

     11,454        11,566        48,207        44,951  

Amortization of other intangible assets

     25,258        21,046        103,148        85,183  

Stock-based compensation

     7,132        8,179        29,064        35,692  

Restructuring expenses

     347        (13      3,368        1,992  

Gain on sale of business

     —          (40,700      —          (40,700

Loss of unconsolidated entities

     265        —          267        —    

Impairment of goodwill and other long-lived assets

     —          19,648        —          37,540  

Shareholder litigation reserve

     —          —          7,325        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 79,342      $ 78,174      $ 338,058      $ 313,644
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.

(*)

Excluding SinglePlatform, which contributed approximately $4.0 million in adjusted EBITDA (excluding the impact of corporate cost allocations) in 2019, adjusted EBITDA would have been approximately $309.6 million.

GAAP to Non-GAAP reconciliation – Free Cash Flow

The following table reflects the reconciliation of cash flow from operations to free cash flow (“FCF”) (all data in thousands):

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2019      2018      2019  

Cash flow from operations

   $ 48,959      $ 46,293      $ 182,552      $ 161,973  

Less:

           

Capital expenditures and financed equipment obligations(1)

     (25,367      (14,187      (53,319      (47,315
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow

   $ 23,592      $ 32,106      $ 129,233      $ 114,658  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Capital expenditures during the three and twelve months ended December 31, 2018 includes $1.8 million and $7.4 million of principal payments under a three year agreement for equipment financing. Capital expenditures during the three and twelve months ended December 31, 2019 includes $1.9 million and $8.2 million of principal payments under a two year agreement for equipment financing. The remaining balance on the equipment financing is $0.8 million as of December 31, 2019.

 

10


Average Revenue Per Subscriber - Calculation and Segment Detail

We present our financial results in the following three segments:

 

   

Web presence. The web presence segment consists primarily of our web hosting brands, including Bluehost and HostGator. This segment also includes related products such as domain names, website security, website design tools and services, and e-commerce products.

 

   

Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products. This segment also generates revenue from sales of our Constant Contact branded website builder tool and our Ecomdash inventory management and marketplace listing solution. For most of 2019, the email marketing segment also included the SinglePlatform digital storefront business, which we sold on December 5, 2019.

 

   

Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with our domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to our web presence segment.

The following table presents the calculation of ARPS, on a consolidated basis and by segment:

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2019      2018      2019  
     (in thousands, except ARPS)  

Consolidated revenue

   $ 282,395      $ 277,198      $ 1,145,291      $ 1,113,278  

Consolidated total subscribers

     4,802        4,766        4,802        4,766  

Consolidated average subscribers

     4,827        4,778        4,927        4,793  

Consolidated ARPS

   $ 19.50      $ 19.34      $ 19.37      $ 19.35  

Web presence revenue

   $ 147,712      $ 143,351      $ 605,315      $ 576,704  

Web presence subscribers

     3,639        3,567        3,639        3,567  

Web presence average subscribers

     3,661        3,573        3,744        3,603  

Web presence ARPS

   $ 13.45      $ 13.37      $ 13.47      $ 13.34  

Email marketing revenue

   $ 103,340      $ 102,688      $ 410,052      $ 410,672  

Email marketing subscribers (1)

     497        468        497        468  

Email marketing average subscribers

     498        484        508        492  

Email marketing ARPS

   $ 69.22      $ 70.70      $ 67.28      $ 69.58  

Domain revenue

   $ 31,343      $ 31,159      $ 129,924      $ 125,902  

Domain subscribers

     666        731        666        731  

Domain average subscribers

     668        721        675        698  

Domain ARPS

   $ 15.63      $ 14.42      $ 16.05      $ 15.02  

 

(1)

The total email marketing subscriber count as of December 31, 2019 includes approximately 1,300 subscribers added as part of the September 2019 acquisition of Ecomdash and reflects a decrease of approximately 23,000 subscribers due to the December 2019 sale of the SinglePlatform business.

 

11


The following table presents a reconciliation by segment of net (loss) income calculated in accordance with GAAP to adjusted EBITDA:

 

     Three Months Ended December 31, 2019  
     Web presence      Email
marketing
     Domain      Total  
     (in thousands)  

Revenue(1)

   $ 143,351      $ 102,688      $ 31,159      $ 277,198  

Gross profit

     74,629        73,669        2,800        151,098  

Net (loss) income

   $ (24,605    $ 44,764      $ (10,606    $ 9,553  

Interest expense, net(2)

     15,926        17,723        407        34,056  

Income tax expense

     7,672        5,498        1,669        14,839  

Depreciation

     8,326        2,360        880        11,566  

Amortization of other intangible assets

     9,306        11,632        108        21,046  

Stock-based compensation

     4,400        2,701        1,078        8,179  

Restructuring expenses

     —          (13      —          (13

Gain on sale of business

     —          (40,700      —          (40,700

(Gain) loss of unconsolidated entities

     —          —             —    

Impairment of goodwill and other long-lived assets

     12,333        —          7,315        19,648  

Shareholder litigation reserve

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 33,358      $ 43,965      $ 851      $ 78,174  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Twelve Months Ended December 31, 2019  
     Web presence      Email
marketing
     Domain      Total  
     (in thousands)  

Revenue(1)

   $ 576,704      $ 410,672      $ 125,902      $ 1,113,278  

Gross profit

     293,679        295,068        14,235        602,982  

Net (loss) income

   $ (44,886    $ 67,412      $ (34,873    $ (12,347

Interest expense, net(2)

     66,779        72,826        3,849        143,454  

Income tax expense

     9,261        6,600        2,018        17,879  

Depreciation

     32,344        9,027        3,580        44,951  

Amortization of other intangible assets

     36,906        45,876        2,401        85,183  

Stock-based compensation

     19,086        12,307        4,299        35,692  

Restructuring expenses

     752        1,207        33        1,992  

Gain on sale of business

     —          (40,700      —          (40,700

(Gain) loss of unconsolidated entities

     —          —          —          —    

Impairment of goodwill and other long-lived assets

     12,333        —          25,207        37,540  

Shareholder litigation reserve

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 132,575      $ 174,555      $ 6,514      $ 313,644  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


     Three months ended December 31, 2018  
     Web presence      Email
marketing
     Domain      Total  
     (in thousands)  

Revenue(1)

   $ 147,712      $ 103,340      $ 31,343      $ 282,395  

Gross profit

     72,441        73,114        9,700        155,255  

Net (loss) income

   $ (1,985    $ 16,278      $ (1,523    $ 12,770  

Interest expense, net(2)

     17,453        17,451        2,284        37,188  

Income tax benefit

     (5,921      (7,894      (1,257      (15,072

Depreciation

     8,146        2,407        901        11,454  

Amortization of other intangible assets

     11,208        13,384        666        25,258  

Stock-based compensation

     3,934        2,470        728        7,132  

Restructuring expenses

     481        (134      —          347  

Loss of unconsolidated entities

     265        —          —          265  

Impairment of goodwill and other long-lived assets

     —          —          —          —    

Shareholder litigation reserve

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 33,581      $ 43,962      $ 1,799      $ 79,342  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Twelve months ended December 31, 2018  
     Web presence      Email
marketing
     Domain      Total  
     (in thousands)  

Revenue(1)

   $ 605,315      $ 410,052      $ 129,924      $ 1,145,291  

Gross profit

     297,590        288,023        38,941        624,554  

Net (loss) income

   $ (22,534    $ 38,628      $ (11,560    $ 4,534  

Interest expense, net(2)

     70,956        68,317        9,118        148,391  

Income tax (benefit) expense

     (4,961      115        (1,400      (6,246

Depreciation

     32,915        11,497        3,795        48,207  

Amortization of other intangible assets

     47,020        53,100        3,028        103,148  

Stock-based compensation

     16,000        9,638        3,426        29,064  

Restructuring expenses

     2,135        589        644        3,368  

Loss of unconsolidated entities

     267        —          —          267  

Impairment of goodwill and other long-lived assets

     —          —          —          —    

Shareholder litigation reserve

     4,780        1,500        1,045        7,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 146,578      $ 183,384      $ 8,096      $ 338,058  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Revenue excludes intercompany transactions between the domain and web presence segments relating to domain sales and services of $2.4 million and $2.3 million for the three months ended December 31, 2018 and 2019, respectively, and $10.0 million and $9.8 million for the twelve months ended December 31, 2018 and 2019, respectively.

(2)

Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income.

 

13


GAAP to Non-GAAP Reconciliation of Fiscal Year 2020 Guidance (as of February 6, 2020) - Free Cash Flow

The following table reflects the reconciliation of fiscal year 2020 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2020 guidance for free cash flow. All figures shown are approximate.

 

($ in millions)

   Twelve Months Ending
December 31, 2020
 

Estimated cash flow from operations

   $ 160  

Estimated capital expenditures and financed equipment obligations

     (50
  

 

 

 

Free cash flow guidance

   $ 110  

 

14