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 second quarter ended June 30, 2019.
“We are pleased with our progress simplifying our operations and
executing our 2019 plans across the company,” commented Jeffrey H.
Fox, president and chief executive officer of Endurance
International Group. “The team is focused on delivering increasing
solution value to the customers of our two scale businesses, email
marketing and web presence. We are pleased with the progress
in our net customer trends and remain focused on executing our
transition to revenue growth in the second half of 2019.”
Second Quarter 2019 Financial Highlights
- Revenue for the second quarter of 2019 was $278.2 million, a
decrease of 3.3 percent compared to $287.8 million for the second
quarter of 2018.
- Net loss for the second quarter of 2019 was $26.2 million, or
$(0.18) per diluted share, compared to net income of $0.6 million,
or $0.00 per diluted share, for the second quarter of 2018.
- Adjusted EBITDA for the second quarter of 2019 was $76.3
million, a decrease of 10.2 percent compared to $85.0 million for
the second quarter of 2018.
- Cash flow from operations for the second quarter of 2019 was
$59.7 million, an increase of 99.7 percent compared to $29.9
million for the second quarter of 2018.
- Free cash flow, defined as cash flow from operations less
capital expenditures and financed equipment obligations, for the
second quarter of 2019 was $47.6 million, an increase of 137.2
percent compared to $20.1 million for the second quarter of
2018.
Second Quarter Operating Highlights
- Total subscribers on platform at June 30, 2019 were
approximately 4.769 million, compared to approximately 4.918
million subscribers at June 30, 2018 and approximately 4.802
million subscribers at December 31, 2018. See “Total
Subscribers” below.
- Average revenue per subscriber, or ARPS, for the second quarter
of 2019 was $19.42, compared to $19.32 for the second quarter of
2018 and $19.50 for the fourth quarter of 2018. See “Average
Revenue Per Subscriber” below.
Fiscal 2019 Guidance
For the full year ending December 31, 2019, and as of the date
of this release, August 1, 2019, the Company continues to
expect:
|
|
2018 Actualas Reported |
|
Guidance(as of August 1,
2019) |
| GAAP revenue |
$1.145 billion |
|
$1.120 to $1.140 billion |
| Adjusted EBITDA |
$338 million |
|
$300 to $320 million |
| Free cash flow |
$129 million |
|
$110 to $120 million |
Adjusted EBITDA and free cash flow are non-GAAP financial
measures. A reconciliation of these non-GAAP financial measures to
their most comparable measure calculated in accordance with GAAP is
provided in the financial statement tables included at the end of
this press release.
First and Second Quarter 2018 Income Tax Expense
Revision
As originally disclosed in third quarter of 2018, the Company
revised its deferred income tax provision for the first and second
quarter of 2018 to reflect a revision that favorably impacted net
income (loss) for these periods. This revision did not impact
the previously reported figures for Adjusted EBITDA, Cash Flow from
Operations or Free Cash Flow.
Conference Call and Webcast Information
Endurance International Group’s second quarter 2019 financial
results teleconference and webcast is scheduled to begin at 8:00
a.m. EDT on Thursday, August 1, 2019. 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. 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.
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.
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)
loss of unconsolidated entities, impairment of 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.
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 obligations. 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 obligations).
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. In the
second quarter of 2019, these adjustments had a negligible impact
on our total subscriber count.
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 StatementsThis 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 statements
addressing or reflecting our expectation of a transition back to
revenue growth in the second half of 2019, our financial guidance
for fiscal year 2019, the expected outcome of our investment and
operational plans, including our focus on simplifying our business
and delivering increased customer value, and our expectations of
future growth and financial and operational performance in general.
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 historical facts, and
statements identified by words such as “expects,” "anticipates,"
“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, strategies or prospects
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 or our actual financial
results may differ from expectations; the possibility that we may
not be able to execute our investment or operational plans or that
these plans 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; 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
increase sales to our existing subscribers, or retain our existing
subscribers; data breaches; 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 GroupEndurance
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 and Domain.com, among others. Headquartered in
Burlington, Massachusetts, Endurance employs over 3,800 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 WhiteEndurance
International Group(781) 852-3450ir@endurance.com
Press Contact:Kristen AndrewsEndurance
International Group(781) 418-6716press@endurance.com
Endurance International Group Holdings,
Inc.Consolidated Balance
Sheets(in thousands, except share and per share
amounts)
| |
December 31, 2018 |
|
June 30, 2019 |
| Assets |
|
|
(unaudited) |
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
88,644 |
|
|
$ |
90,818 |
|
|
Restricted cash |
1,932 |
|
|
1,832 |
|
|
Accounts receivable |
12,205 |
|
|
12,989 |
|
|
Prepaid domain name registry fees |
56,779 |
|
|
57,326 |
|
|
Prepaid commissions |
41,458 |
|
|
41,704 |
|
|
Prepaid and refundable taxes |
7,235 |
|
|
6,517 |
|
|
Prepaid expenses and other current assets |
27,855 |
|
|
26,411 |
|
| Total current assets |
236,108 |
|
|
237,597 |
|
|
Property and equipment—net |
92,275 |
|
|
88,700 |
|
|
Operating lease right-of-use assets |
— |
|
|
104,210 |
|
|
Goodwill |
1,849,065 |
|
|
1,848,949 |
|
|
Other intangible assets—net |
352,516 |
|
|
292,191 |
|
|
Deferred financing costs—net |
2,656 |
|
|
2,221 |
|
|
Investments |
15,000 |
|
|
15,000 |
|
|
Prepaid domain name registry fees, net of current portion |
11,207 |
|
|
11,281 |
|
|
Prepaid commissions, net of current portion |
42,472 |
|
|
45,160 |
|
|
Other assets |
5,208 |
|
|
2,778 |
|
| Total assets |
$ |
2,606,507 |
|
|
$ |
2,648,087 |
|
| Liabilities and
stockholders’ equity |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
12,449 |
|
|
$ |
14,933 |
|
|
Accrued expenses |
79,279 |
|
|
64,774 |
|
|
Accrued taxes |
2,498 |
|
|
2,418 |
|
|
Accrued interest |
25,259 |
|
|
24,483 |
|
|
Deferred revenue |
371,758 |
|
|
376,046 |
|
|
Operating lease liabilities—short term |
— |
|
|
22,483 |
|
|
Current portion of notes payable |
31,606 |
|
|
31,606 |
|
|
Current portion of financed equipment |
8,379 |
|
|
4,583 |
|
|
Deferred consideration—short term |
2,425 |
|
|
1,408 |
|
|
Other current liabilities |
3,147 |
|
|
2,319 |
|
| Total current liabilities |
536,800 |
|
|
545,053 |
|
| Long-term deferred revenue |
96,140 |
|
|
99,249 |
|
| Operating lease liabilities—long
term |
— |
|
|
90,989 |
|
| Notes payable—long term, net of
original issue discounts of $21,349 and $19,151 and deferred
financing costs of $31,992 and $28,919, respectively |
1,770,055 |
|
|
1,725,326 |
|
| Deferred tax liability |
16,457 |
|
|
18,785 |
|
| Deferred consideration—long
term |
1,364 |
|
|
— |
|
| Other liabilities |
11,237 |
|
|
6,460 |
|
| Total liabilities |
2,432,053 |
|
|
2,485,862 |
|
| 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 145,741,251 shares issued at December 31, 2018 and
June 30, 2019, respectively; 143,444,178 and 145,741,251
outstanding at December 31, 2018 and June 30, 2019,
respectively |
14 |
|
|
14 |
|
|
Additional paid-in capital |
961,235 |
|
|
979,626 |
|
|
Accumulated other comprehensive loss |
(3,211 |
) |
|
(4,115 |
) |
|
Accumulated deficit |
(783,584 |
) |
|
(813,300 |
) |
| Total stockholders’ equity |
174,454 |
|
|
162,225 |
|
| Total liabilities and
stockholders’ equity |
$ |
2,606,507 |
|
|
$ |
2,648,087 |
|
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 June 30, |
|
Six Months Ended June 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Revenue |
$ |
287,770 |
|
|
$ |
278,204 |
|
|
$ |
579,126 |
|
|
$ |
558,887 |
|
| Cost of revenue |
130,746 |
|
|
139,587 |
|
|
264,652 |
|
|
263,441 |
|
| Gross profit |
157,024 |
|
|
138,617 |
|
|
314,474 |
|
|
295,446 |
|
| Operating expense: |
|
|
|
|
|
|
|
|
Sales and marketing |
66,546 |
|
|
65,490 |
|
|
133,902 |
|
|
132,078 |
|
|
Engineering and development |
21,959 |
|
|
25,348 |
|
|
41,876 |
|
|
49,042 |
|
|
General and administrative |
30,744 |
|
|
31,124 |
|
|
69,519 |
|
|
62,517 |
|
| Total operating expense |
119,249 |
|
|
121,962 |
|
|
245,297 |
|
|
243,637 |
|
| Income from operations |
37,775 |
|
|
16,655 |
|
|
69,177 |
|
|
51,809 |
|
| Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
227 |
|
|
314 |
|
|
431 |
|
|
605 |
|
|
Interest expense |
(38,346 |
) |
|
(37,037 |
) |
|
(74,396 |
) |
|
(74,251 |
) |
| Total other expense—net |
(38,119 |
) |
|
(36,723 |
) |
|
(73,965 |
) |
|
(73,646 |
) |
| Loss before income taxes and
equity earnings of unconsolidated entities |
(344 |
) |
|
(20,068 |
) |
|
(4,788 |
) |
|
(21,837 |
) |
| Income tax (benefit) expense |
(946 |
) |
|
6,160 |
|
|
(2,889 |
) |
|
7,879 |
|
| Income (loss) before equity
earnings of unconsolidated entities |
602 |
|
|
(26,228 |
) |
|
(1,899 |
) |
|
(29,716 |
) |
| Equity (income) loss of
unconsolidated entities, net of tax |
(25 |
) |
|
— |
|
|
2 |
|
|
— |
|
| Net income (loss) |
$ |
627 |
|
|
$ |
(26,228 |
) |
|
$ |
(1,901 |
) |
|
$ |
(29,716 |
) |
| Comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
(2,425 |
) |
|
348 |
|
|
(1,845 |
) |
|
(53 |
) |
|
Unrealized gain (loss) on cash flow hedge, net of tax (expense)
benefit of ($45) and ($370) for the three and six months ended June
30, 2018, respectively, and ($35) and $269 for the three and six
months ended June 30, 2019, respectively |
144 |
|
|
110 |
|
|
1,184 |
|
|
(851 |
) |
| Total comprehensive loss |
$ |
(1,654 |
) |
|
$ |
(25,770 |
) |
|
$ |
(2,562 |
) |
|
$ |
(30,620 |
) |
| Basic net income (loss) per share
attributable to Endurance International Group Holdings, Inc. |
$ |
0.00 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.21 |
) |
| Diluted net income (loss) per
share attributable to Endurance International Group Holdings,
Inc. |
$ |
0.00 |
|
|
$ |
(0.18 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.21 |
) |
| Weighted-average common shares
used in computing net income (loss) per share: |
|
|
|
|
|
|
|
| Basic |
142,340,561 |
|
|
145,308,823 |
|
|
141,356,567 |
|
|
144,414,929 |
|
| Diluted |
144,702,002 |
|
|
145,308,823 |
|
|
141,356,567 |
|
|
144,414,929 |
|
Endurance International Group Holdings,
Inc.Consolidated Statements of Cash
Flows(unaudited)(in
thousands)
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
627 |
|
|
$ |
(26,228 |
) |
|
$ |
(1,901 |
) |
|
$ |
(29,716 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
12,796 |
|
|
10,899 |
|
|
24,864 |
|
|
22,105 |
|
|
Amortization of other intangible assets |
25,978 |
|
|
21,349 |
|
|
51,713 |
|
|
42,469 |
|
|
Impairment of long lived assets |
— |
|
|
17,892 |
|
|
— |
|
|
17,892 |
|
|
Amortization of deferred financing costs |
1,092 |
|
|
1,776 |
|
|
2,986 |
|
|
3,509 |
|
|
Amortization of net present value of deferred consideration |
123 |
|
|
59 |
|
|
251 |
|
|
120 |
|
|
Amortization of original issue discounts |
1,068 |
|
|
1,111 |
|
|
2,126 |
|
|
2,198 |
|
|
Stock-based compensation |
7,390 |
|
|
9,354 |
|
|
14,382 |
|
|
18,370 |
|
|
Deferred tax expense (benefit) |
(416 |
) |
|
3,533 |
|
|
(4,484 |
) |
|
2,627 |
|
|
Loss on sale of assets |
213 |
|
|
110 |
|
|
261 |
|
|
136 |
|
|
Loss from unconsolidated entities |
(25 |
) |
|
— |
|
|
2 |
|
|
— |
|
|
Financing costs expensed |
1,228 |
|
|
— |
|
|
1,228 |
|
|
— |
|
|
Loss on early extinguishment of debt |
331 |
|
|
— |
|
|
331 |
|
|
— |
|
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
|
|
|
|
|
Accounts receivable |
1,292 |
|
|
590 |
|
|
3,740 |
|
|
(793 |
) |
|
Prepaid expenses and other current assets |
(5,857 |
) |
|
4,620 |
|
|
(8,668 |
) |
|
2,328 |
|
|
Prepaid and refundable taxes |
(1,461 |
) |
|
1,316 |
|
|
(1,102 |
) |
|
725 |
|
|
Leases right-of-use asset, net |
— |
|
|
80 |
|
|
— |
|
|
653 |
|
|
Accounts payable and accrued expenses |
(12,020 |
) |
|
16,377 |
|
|
(11,670 |
) |
|
(15,135 |
) |
|
Deferred revenue |
(2,467 |
) |
|
(3,158 |
) |
|
8,193 |
|
|
7,241 |
|
| Net cash provided by operating
activities |
29,892 |
|
|
59,680 |
|
|
82,252 |
|
|
74,729 |
|
| Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
(8,127 |
) |
|
(10,741 |
) |
|
(13,381 |
) |
|
(16,164 |
) |
| Net cash used in investing
activities |
(8,127 |
) |
|
(10,741 |
) |
|
(13,381 |
) |
|
(16,164 |
) |
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of term loan and notes, net of original
issue discounts |
1,580,305 |
|
|
— |
|
|
1,580,305 |
|
|
— |
|
|
Repayments of term loans |
(1,605,207 |
) |
|
(25,000 |
) |
|
(1,630,693 |
) |
|
(50,000 |
) |
|
Payment of financing costs |
(1,295 |
) |
|
— |
|
|
(1,295 |
) |
|
— |
|
|
Payment of deferred consideration |
(4,196 |
) |
|
(2,500 |
) |
|
(4,196 |
) |
|
(2,500 |
) |
|
Principal payments on financed equipment |
(1,679 |
) |
|
(1,291 |
) |
|
(3,909 |
) |
|
(3,861 |
) |
|
Proceeds from exercise of stock options |
431 |
|
|
17 |
|
|
456 |
|
|
22 |
|
| Net cash used in financing
activities |
(31,641 |
) |
|
(28,774 |
) |
|
(59,332 |
) |
|
(56,339 |
) |
| Net effect of exchange rate on
cash and cash equivalents and restricted cash |
(1,405 |
) |
|
470 |
|
|
(1,488 |
) |
|
(152 |
) |
| Net increase (decrease) in cash
and cash equivalents and restricted cash |
(11,281 |
) |
|
20,635 |
|
|
8,051 |
|
|
2,074 |
|
| Cash and cash equivalents and
restricted cash: |
|
|
|
|
|
|
|
|
Beginning of period |
88,450 |
|
|
72,015 |
|
|
69,118 |
|
|
90,576 |
|
|
End of period |
$ |
77,169 |
|
|
$ |
92,650 |
|
|
$ |
77,169 |
|
|
$ |
92,650 |
|
| Supplemental cash flow
information: |
|
|
|
|
|
|
|
| Interest paid |
$ |
30,370 |
|
|
$ |
24,094 |
|
|
$ |
72,461 |
|
|
$ |
68,353 |
|
| Income taxes paid (received) |
$ |
1,519 |
|
|
$ |
(1,142 |
) |
|
$ |
2,122 |
|
|
$ |
724 |
|
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 (all
data in thousands):
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Net income (loss) |
$ |
627 |
|
|
$ |
(26,228 |
) |
|
$ |
(1,901 |
) |
|
$ |
(29,716 |
) |
| Interest expense, net(1) |
38,119 |
|
|
36,723 |
|
|
73,965 |
|
|
73,646 |
|
| Income tax (benefit)
expense |
(946 |
) |
|
6,160 |
|
|
(2,889 |
) |
|
7,879 |
|
| Depreciation |
12,796 |
|
|
10,899 |
|
|
24,864 |
|
|
22,105 |
|
| Amortization of other
intangible assets |
25,978 |
|
|
21,349 |
|
|
51,713 |
|
|
42,469 |
|
| Stock-based compensation |
7,390 |
|
|
9,354 |
|
|
14,382 |
|
|
18,370 |
|
| Restructuring expenses |
1,295 |
|
|
183 |
|
|
2,824 |
|
|
2,198 |
|
| (Gain) loss from unconsolidated
entities |
(25 |
) |
|
— |
|
|
2 |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
17,892 |
|
|
— |
|
|
17,892 |
|
| Shareholder litigation
reserve |
(240 |
) |
|
— |
|
|
8,260 |
|
|
— |
|
| Adjusted EBITDA |
$ |
84,994 |
|
|
$ |
76,332 |
|
|
$ |
171,220 |
|
|
$ |
154,843 |
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issuance discounts and interest
income.
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 June 30, |
|
Six Months Ended June 30, |
| |
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
Cash flows from operations |
$ |
29,892 |
|
|
$ |
59,680 |
|
|
$ |
82,252 |
|
|
$ |
74,729 |
|
| Less: |
|
|
|
|
|
|
|
| Capital expenditures
and financed equipment(1) |
(9,806 |
) |
|
(12,032 |
) |
|
(17,290 |
) |
|
(20,025 |
) |
| Free cash flow |
$ |
20,086 |
|
|
$ |
47,648 |
|
|
$ |
64,962 |
|
|
$ |
54,704 |
|
|
(1) |
Capital expenditures during the three months ended June 30, 2018
and 2019 includes $1.7 million and $1.3 million, respectively, of
principal payments under a three year agreement for equipment
financing. Capital expenditures during the six months ended June
30, 2018 and 2019 includes $3.9 million and $3.9 million,
respectively, of principal payments under a three year agreement
for equipment financing. The remaining balance on the equipment
financing is $4.6 million as of June 30, 2019. |
|
|
|
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 and the
SinglePlatform digital storefront solution. This segment also
generates revenue from sales of our Constant Contact-branded
website builder tool.
- 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 (all data in thousands, except
ARPS data):
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Consolidated revenue |
$ |
287,770 |
|
|
$ |
278,204 |
|
|
$ |
579,126 |
|
|
$ |
558,887 |
|
| Consolidated total
subscribers |
4,918 |
|
|
4,769 |
|
|
4,918 |
|
|
4,769 |
|
| Consolidated average
subscribers for the period |
4,965 |
|
|
4,776 |
|
|
4,985 |
|
|
4,786 |
|
| Consolidated
ARPS |
$ |
19.32 |
|
|
$ |
19.42 |
|
|
$ |
19.36 |
|
|
$ |
19.46 |
|
| |
|
|
|
|
|
|
|
| Web presence revenue |
$ |
152,715 |
|
|
$ |
144,197 |
|
|
$ |
307,732 |
|
|
$ |
290,157 |
|
| Web presence subscribers |
3,737 |
|
|
3,588 |
|
|
3,737 |
|
|
3,588 |
|
| Web presence average
subscribers for the period |
3,774 |
|
|
3,600 |
|
|
3,793 |
|
|
3,614 |
|
| Web presence
ARPS |
$ |
13.49 |
|
|
$ |
13.35 |
|
|
$ |
13.52 |
|
|
$ |
13.38 |
|
| |
|
|
|
|
|
|
|
| Email marketing revenue |
$ |
102,154 |
|
|
$ |
102,479 |
|
|
$ |
204,601 |
|
|
$ |
205,219 |
|
| Email marketing
subscribers |
504 |
|
|
492 |
|
|
504 |
|
|
492 |
|
| Email marketing average
subscribers for the period |
511 |
|
|
493 |
|
|
512 |
|
|
494 |
|
| Email marketing
ARPS |
$ |
66.60 |
|
|
$ |
69.28 |
|
|
$ |
66.64 |
|
|
$ |
69.21 |
|
| |
|
|
|
|
|
|
|
| Domain revenue |
$ |
32,901 |
|
|
$ |
31,528 |
|
|
$ |
66,793 |
|
|
$ |
63,511 |
|
| Domain subscribers |
677 |
|
|
689 |
|
|
677 |
|
|
689 |
|
| Domain average subscribers for
the period |
680 |
|
|
683 |
|
|
680 |
|
|
678 |
|
| Domain
ARPS |
$ |
16.13 |
|
|
$ |
15.39 |
|
|
$ |
16.36 |
|
|
$ |
15.62 |
|
The following table presents revenue, gross profit, and a
reconciliation by segment of net income (loss) calculated in
accordance with GAAP to adjusted EBITDA (all data in
thousands):
| |
Three Months Ended June 30, 2018 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
|
Revenue |
$ |
152,715 |
|
|
$ |
102,154 |
|
|
$ |
32,901 |
|
|
$ |
287,770 |
|
| Gross profit |
$ |
75,702 |
|
|
$ |
71,376 |
|
|
$ |
9,946 |
|
|
$ |
157,024 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(6,876 |
) |
|
$ |
10,395 |
|
|
$ |
(2,892 |
) |
|
$ |
627 |
|
| Interest expense, net(1) |
18,385 |
|
|
17,329 |
|
|
2,405 |
|
|
38,119 |
|
| Income tax (benefit)
expense |
(497 |
) |
|
(333 |
) |
|
(116 |
) |
|
(946 |
) |
| Depreciation |
8,391 |
|
|
3,406 |
|
|
999 |
|
|
12,796 |
|
| Amortization of other
intangible assets |
11,863 |
|
|
13,239 |
|
|
876 |
|
|
25,978 |
|
| Stock-based compensation |
5,424 |
|
|
1,288 |
|
|
678 |
|
|
7,390 |
|
| Restructuring expenses |
788 |
|
|
420 |
|
|
87 |
|
|
1,295 |
|
| (Gain) loss of unconsolidated
entities |
(25 |
) |
|
— |
|
|
— |
|
|
(25 |
) |
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shareholder litigation
reserve |
(197 |
) |
|
— |
|
|
(43 |
) |
|
(240 |
) |
| Adjusted
EBITDA |
$ |
37,256 |
|
|
$ |
45,744 |
|
|
$ |
1,994 |
|
|
$ |
84,994 |
|
| |
|
|
|
|
|
|
|
| |
Three Months Ended June 30, 2019 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
| Revenue |
$ |
144,197 |
|
|
$ |
102,479 |
|
|
$ |
31,528 |
|
|
$ |
278,204 |
|
| Gross profit |
$ |
73,217 |
|
|
$ |
73,589 |
|
|
$ |
(8,189 |
) |
|
$ |
138,617 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(10,262 |
) |
|
$ |
4,164 |
|
|
$ |
(20,130 |
) |
|
$ |
(26,228 |
) |
| Interest expense, net(1) |
17,093 |
|
|
19,110 |
|
|
520 |
|
|
36,723 |
|
| Income tax (benefit)
expense |
3,193 |
|
|
2,269 |
|
|
698 |
|
|
6,160 |
|
| Depreciation |
7,767 |
|
|
2,229 |
|
|
903 |
|
|
10,899 |
|
| Amortization of other
intangible assets |
9,210 |
|
|
11,408 |
|
|
731 |
|
|
21,349 |
|
| Stock-based compensation |
5,042 |
|
|
3,222 |
|
|
1,090 |
|
|
9,354 |
|
| Restructuring expenses |
155 |
|
|
23 |
|
|
5 |
|
|
183 |
|
| (Gain) loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
17,892 |
|
|
17,892 |
|
| Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted
EBITDA |
$ |
32,198 |
|
|
$ |
42,425 |
|
|
$ |
1,709 |
|
|
$ |
76,332 |
|
| |
Six Months Ended June 30, 2018 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
|
Revenue |
$ |
307,732 |
|
|
$ |
204,601 |
|
|
$ |
66,793 |
|
|
$ |
579,126 |
|
| Gross profit |
$ |
150,075 |
|
|
$ |
143,553 |
|
|
$ |
20,846 |
|
|
$ |
314,474 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(12,984 |
) |
|
$ |
15,754 |
|
|
$ |
(4,671 |
) |
|
$ |
(1,901 |
) |
| Interest expense, net(1) |
35,371 |
|
|
33,738 |
|
|
4,856 |
|
|
73,965 |
|
| Income tax (benefit)
expense |
(5,176 |
) |
|
3,830 |
|
|
(1,543 |
) |
|
(2,889 |
) |
| Depreciation |
16,368 |
|
|
6,552 |
|
|
1,944 |
|
|
24,864 |
|
| Amortization of other
intangible assets |
23,871 |
|
|
26,332 |
|
|
1,510 |
|
|
51,713 |
|
| Stock-based compensation |
10,497 |
|
|
2,696 |
|
|
1,189 |
|
|
14,382 |
|
| Restructuring expenses |
1,600 |
|
|
582 |
|
|
642 |
|
|
2,824 |
|
| (Gain) loss of unconsolidated
entities |
2 |
|
|
— |
|
|
— |
|
|
2 |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shareholder litigation
reserve |
5,548 |
|
|
1,500 |
|
|
1,212 |
|
|
8,260 |
|
| Adjusted
EBITDA |
$ |
75,097 |
|
|
$ |
90,984 |
|
|
$ |
5,139 |
|
|
$ |
171,220 |
|
| |
|
|
|
|
|
|
|
| |
Six Months Ended June 30, 2019 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
| Revenue |
$ |
290,157 |
|
|
$ |
205,219 |
|
|
$ |
63,511 |
|
|
$ |
558,887 |
|
| Gross profit |
$ |
145,458 |
|
|
$ |
147,636 |
|
|
$ |
2,352 |
|
|
$ |
295,446 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(16,804 |
) |
|
$ |
10,102 |
|
|
$ |
(23,014 |
) |
|
$ |
(29,716 |
) |
| Interest expense, net(1) |
34,188 |
|
|
36,504 |
|
|
2,954 |
|
|
73,646 |
|
| Income tax (benefit)
expense |
4,088 |
|
|
2,897 |
|
|
894 |
|
|
7,879 |
|
| Depreciation |
15,716 |
|
|
4,553 |
|
|
1,836 |
|
|
22,105 |
|
| Amortization of other
intangible assets |
18,289 |
|
|
22,691 |
|
|
1,489 |
|
|
42,469 |
|
| Stock-based compensation |
9,935 |
|
|
6,305 |
|
|
2,130 |
|
|
18,370 |
|
| Restructuring expenses |
789 |
|
|
1,377 |
|
|
32 |
|
|
2,198 |
|
| (Gain) loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
17,892 |
|
|
17,892 |
|
| Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted
EBITDA |
$ |
66,201 |
|
|
$ |
84,429 |
|
|
$ |
4,213 |
|
|
$ |
154,843 |
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issuance discounts and interest
income.
The following table represents the impact of the income
statement revision to the second quarter of 2018 due to the revised
deferred income tax provision (in thousands, except per share
data):
| |
Three Months Ended June 30, 2018 |
|
Six Months Ended June 30, 2018 |
| |
Originally Filed |
Adjustment |
Revised |
|
Originally Filed |
Adjustment |
Revised |
|
Loss before income taxes and equity earnings of unconsolidated
subsidiaries |
$ |
(344 |
) |
$ |
— |
|
$ |
(344 |
) |
|
$ |
(4,788 |
) |
$ |
— |
|
$ |
(4,788 |
) |
| Income tax expense
(benefit) |
1,650 |
|
(2,596 |
) |
(946 |
) |
|
4,267 |
|
(7,156 |
) |
(2,889 |
) |
| (Loss) income before equity
earnings of unconsolidated subsidiaries |
(1,994 |
) |
2,596 |
|
602 |
|
|
(9,055 |
) |
7,156 |
|
(1,899 |
) |
| Equity (income) loss of
unconsolidated subsidiaries |
(25 |
) |
— |
|
(25 |
) |
|
2 |
|
— |
|
2 |
|
| Net income (loss) |
$ |
(1,969 |
) |
$ |
2,596 |
|
$ |
627 |
|
|
$ |
(9,057 |
) |
$ |
7,156 |
|
$ |
(1,901 |
) |
| Comprehensive income
(loss) |
|
|
|
|
|
|
|
|
Foreign currency translation |
(2,425 |
) |
— |
|
(2,425 |
) |
|
(1,845 |
) |
— |
|
(1,845 |
) |
|
Unrealized (gain) loss on cash flow hedge, net of tax |
144 |
|
— |
|
144 |
|
|
1,184 |
|
— |
|
1,184 |
|
| Total comprehensive loss |
$ |
(4,250 |
) |
$ |
2,596 |
|
$ |
(1,654 |
) |
|
$ |
(9,718 |
) |
$ |
7,156 |
|
$ |
(2,562 |
) |
| Basic net income (loss) per
share |
$ |
(0.01 |
) |
$ |
0.01 |
|
$ |
— |
|
|
$ |
(0.06 |
) |
$ |
0.05 |
|
$ |
(0.01 |
) |
| Diluted net income (loss) per
share |
$ |
(0.01 |
) |
$ |
0.01 |
|
$ |
— |
|
|
$ |
(0.06 |
) |
$ |
0.05 |
|
$ |
(0.01 |
) |
| Weighted-average common shares
used in computing net income (loss) per share |
|
|
|
|
|
|
|
| Basic |
142,340,561 |
|
— |
|
142,340,561 |
|
|
141,356,567 |
|
— |
|
141,356,567 |
|
| Diluted |
142,340,561 |
|
2,361,441 |
|
144,702,002 |
|
|
141,356,567 |
|
— |
|
141,356,567 |
|
The following table represents the impact of the revised
deferred income tax provision on the impacted balance sheet
accounts as of the date shown (in thousands):
| |
June 30, 2018 |
| |
Originally Filed |
Adjustment |
Revised |
|
Deferred tax liability |
$ |
29,897 |
|
$ |
(7,156 |
) |
$ |
22,741 |
|
| Total liabilities |
2,490,106 |
|
(7,156 |
) |
2,482,950 |
|
| Accumulated deficit |
(797,175 |
) |
7,156 |
|
(790,019 |
) |
| Total stockholders'
equity |
147,759 |
|
7,156 |
|
154,915 |
|
| Total liabilities and
stockholders' equity |
2,637,865 |
|
— |
|
2,637,865 |
|
The following table represents the impact of the revised
deferred income tax provision on the impacted lines of the
statement of cash flows for the periods shown (in thousands):
| |
Three Months Ended June 30, 2018 |
|
Six Months Ended June 30, 2018 |
| |
Originally Filed |
Adjustment |
Revised |
|
Originally Filed |
Adjustment |
Revised |
|
Net income (loss) |
$ |
(1,969 |
) |
$ |
2,596 |
|
$ |
627 |
|
|
$ |
(9,057 |
) |
$ |
7,156 |
|
$ |
(1,901 |
) |
| Deferred tax expense |
2,180 |
|
(2,596 |
) |
(416 |
) |
|
2,672 |
|
(7,156 |
) |
(4,484 |
) |
| Net cash provided by operating
activities |
29,892 |
|
— |
|
29,892 |
|
|
82,252 |
|
— |
|
82,252 |
|
GAAP to Non-GAAP Reconciliation of Fiscal Year 2019
Guidance (as of August 1, 2019) - Adjusted EBITDA
The following table reflects the reconciliation of fiscal year
2019 estimated net loss calculated in accordance with GAAP to
fiscal year 2019 guidance for adjusted EBITDA. All figures shown
are approximate.
|
($ in millions) |
Twelve Months EndingDecember 31, 2019 |
|
Estimated net loss |
$ |
(39 |
) |
$ |
(32 |
) |
| Estimated interest expense
(net) |
|
146 |
|
|
148 |
|
| Estimated income tax expense
(benefit) |
|
6 |
|
|
8 |
|
| Estimated depreciation |
|
44 |
|
|
48 |
|
| Estimated amortization of
acquired intangible assets |
|
85 |
|
|
87 |
|
| Estimated stock-based
compensation |
|
36 |
|
|
38 |
|
| Estimated restructuring
expenses |
|
4 |
|
|
5 |
|
| Estimated transaction expenses
and charges |
|
— |
|
|
— |
|
| Estimated (gain) loss of
unconsolidated entities |
|
— |
|
|
— |
|
| Estimated impairment of other
long-lived assets |
|
18 |
|
|
18 |
|
| Adjusted EBITDA
guidance |
$ |
300 |
|
$ |
320 |
|
GAAP to Non-GAAP Reconciliation of Fiscal Year 2019
Guidance (as of August 1, 2019) - Free Cash Flow
The following table reflects the reconciliation of fiscal year
2019 estimated cash flow from operations calculated in accordance
with GAAP to fiscal year 2019 guidance for free cash flow. All
figures shown are approximate.
|
($ in millions) |
Twelve Months EndingDecember 31, 2019 |
|
Estimated cash flow from operations |
$ |
160 |
|
$ |
175 |
|
| Estimated capital expenditures
and financed equipment obligations |
|
(50 |
) |
|
(55 |
) |
| Free cash flow
guidance |
$ |
110 |
|
$ |
120 |
|
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