Fiscal Year 2017
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, 2017.
“We are pleased with the profit and cash flow we generated in
the fourth quarter,” commented Jeffrey H. Fox, president and chief
executive officer of Endurance International Group. “We enter
2018 focused on simplifying our operations and increasing
investment in our market-leading brands. We are focused on
increasing the value we deliver to our customers as we integrate
our assets to operate more effectively at scale."
Full Year and Fourth Quarter 2017 Financial
Highlights
- For fiscal year 2017, revenue was $1.177 billion, an increase
of 6 percent compared to $1.111 billion in fiscal 2016.
Revenue for the fourth quarter of 2017 was $294.2 million, an
increase of 1 percent compared to $292.1 million in the fourth
quarter of 2016.
- For fiscal year 2017, net loss was $99.8 million compared to a
net loss of $81.2 million for fiscal 2016. Net income for the
fourth quarter of 2017 was $7.5 million compared to a net loss of
$32.1 million for the fourth quarter of 2016.
- For fiscal year 2017, net loss attributable to Endurance
International Group Holdings, Inc. was $107.3 million, or $(0.78)
per diluted share, compared to a net loss of $72.8 million, or
$(0.55) per diluted share, for fiscal 2016. Net income
attributable to Endurance International Group Holdings, Inc. for
the fourth quarter of 2017 was $7.5 million, or $0.05 per diluted
share, compared to a net loss of $34.9 million, or $(0.26) per
diluted share, for the fourth quarter of 2016.
- Adjusted EBITDA for fiscal year 2017 was $350.8 million, an
increase of 22 percent compared to $288.4 million in fiscal
2016. Adjusted EBITDA for the fourth quarter of 2017 was
$94.4 million, an increase of 9 percent compared to $87.0 million
in the fourth quarter of 2016.
- Cash flow from operations for fiscal year 2017 was $201.3
million, an increase of 30 percent compared to $155.0 million for
fiscal 2016. Cash flow from operations for the fourth quarter
of 2017 was $72.4 million, an increase of 36 percent compared to
$53.2 million for the fourth quarter of 2016.
- Free cash flow, defined as cash flow from operations less
capital expenditures and capital lease obligations, for fiscal year
2017 was $150.8 million, an increase of 35 percent compared to
$111.8 million in fiscal 2016. Free cash flow for the fourth
quarter of 2017 was $59.7 million, an increase of 37 percent
compared to $43.7 million for the fourth quarter of
2016.
- During fiscal 2017, the company reduced the balance of its term
loan by $100.4 million.
Full Year and Fourth Quarter Operating
Highlights
- Total subscribers on platform at December 31, 2017 were
approximately 5.051 million, compared to approximately 5.122
million subscribers at September 30, 2017 and 5.371 million
subscribers at December 31, 2016. See “Total
Subscribers” below.
- Average revenue per subscriber, or ARPS, for fiscal year 2017
was $18.82, compared to $17.53 for fiscal year 2016. ARPS for
the fourth quarter of 2017 was $19.28, compared to $18.02 for the
fourth quarter of 2016.
Fiscal 2018 Guidance
The company is providing the following guidance as of the date
of this release, February 13, 2018. For the full year ending
December 31, 2018, the company expects:
|
2017 ActualAs reported |
Guidance(as of February 13,
2018) |
GAAP revenue |
$1.177
billion |
$1.140
to $1.160 billion |
Adjusted EBITDA |
$351
million |
$310 to
$330 million |
Free cash flow |
$151
million |
~$120
million |
|
|
|
Free cash flow guidance does not include the impact of potential
settlements of pending legal proceedings. 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.
Conference Call and Webcast Information
Endurance International Group’s fourth quarter and full year
2017 financial results teleconference and webcast is scheduled to
begin at 8:00 a.m. EST on Tuesday, February 13, 2018. 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, and SEC investigations 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 capital lease 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 capital lease 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 fourth quarter
of 2017, these adjustments had a net negative impact of
approximately 700 subscribers 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 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 statements concerning our financial guidance for fiscal
year 2018, our expectations regarding our 2018 priorities and
investment plans, the ability of these investments to drive future
growth and long-term value, and our expected 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,” “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 (including due to our payment of any potential
settlements of pending legal proceedings); 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; 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 the “Risk Factors”
section of our most recent Quarterly Report on Form 10-Q for the
quarter ended September 30, 2017 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) (em)Powers
millions of small businesses worldwide with products and technology
to enhance their online web presence, email marketing, mobile
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 3,600 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)
482-5809press@endurance.com
|
Endurance International Group Holdings,
Inc.Consolidated Balance
Sheets(unaudited)(in thousands, except
share and per share amounts) |
|
|
December 31, 2016 |
|
December 31, 2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
53,596 |
|
|
$ |
66,493 |
|
Restricted cash |
3,302 |
|
|
2,625 |
|
Accounts
receivable |
13,088 |
|
|
15,945 |
|
Prepaid
domain name registry fees |
55,444 |
|
|
53,805 |
|
Prepaid
expenses and other current assets |
28,678 |
|
|
29,327 |
|
Total current
assets |
154,108 |
|
|
168,195 |
|
Property
and equipment—net |
95,272 |
|
|
95,452 |
|
Goodwill |
1,859,909 |
|
|
1,850,582 |
|
Other
intangible assets—net |
612,057 |
|
|
455,440 |
|
Deferred
financing costs |
4,932 |
|
|
3,189 |
|
Investments |
15,857 |
|
|
15,267 |
|
Prepaid
domain name registry fees, net of current portion |
10,429 |
|
|
10,806 |
|
Other
assets |
3,710 |
|
|
2,155 |
|
Total assets |
$ |
2,756,274 |
|
|
$ |
2,601,086 |
|
Liabilities,
redeemable non-controlling interest and stockholders’
equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
16,074 |
|
|
11,058 |
|
Accrued
expenses |
67,722 |
|
|
79,991 |
|
Accrued
interest |
27,246 |
|
|
24,457 |
|
Deferred
revenue |
355,190 |
|
|
361,940 |
|
Current
portion of notes payable |
35,700 |
|
|
33,945 |
|
Current
portion of capital lease obligations |
6,690 |
|
|
7,630 |
|
Deferred
consideration—short term |
5,273 |
|
|
4,365 |
|
Other
current liabilities |
2,890 |
|
|
4,031 |
|
Total current
liabilities |
516,785 |
|
|
527,417 |
|
Long-term deferred
revenue |
89,200 |
|
|
90,972 |
|
Notes payable—long
term, net of original issue discounts of $25,853 and $25,811, and
deferred financing costs of $43,342 and $37,736, respectively |
1,951,280 |
|
|
1,858,300 |
|
Capital lease
obligations—long term |
512 |
|
|
7,719 |
|
Deferred tax
liability |
39,943 |
|
|
19,696 |
|
Deferred
consideration—long term |
7,444 |
|
|
3,551 |
|
Other liabilities |
8,974 |
|
|
10,426 |
|
Total liabilities |
2,614,138 |
|
|
2,518,081 |
|
Redeemable
non-controlling interest |
17,753 |
|
|
— |
|
Commitments and
contingencies |
|
|
|
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; 134,793,857
and 140,190,695 shares issued at December 31, 2016 and
December 31, 2017, respectively; 134,793,857 and 140,190,695
outstanding at December 31, 2016 and December 31, 2017,
respectively |
14 |
|
|
14 |
|
Additional paid-in capital |
868,228 |
|
|
931,033 |
|
Accumulated other comprehensive loss |
(3,666 |
) |
|
(541 |
) |
Accumulated deficit |
(740,193 |
) |
|
(847,501 |
) |
Total stockholders’
equity |
124,383 |
|
|
83,005 |
|
Total liabilities,
redeemable non-controlling interest and stockholders’ equity |
$ |
2,756,274 |
|
|
$ |
2,601,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endurance International Group Holdings,
Inc.Consolidated Statements of Operations and
Comprehensive Loss(unaudited)(in
thousands, except share and per share amounts) |
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
Revenue |
$ |
292,123 |
|
|
$ |
294,250 |
|
|
$ |
1,111,142 |
|
|
$ |
1,176,867 |
|
|
Cost of revenue |
145,011 |
|
|
149,733 |
|
|
583,991 |
|
|
603,930 |
|
|
Gross profit |
147,112 |
|
|
144,517 |
|
|
527,151 |
|
|
572,937 |
|
|
Operating expense: |
|
|
|
|
|
|
|
Sales and
marketing |
68,567 |
|
|
66,306 |
|
|
303,511 |
|
|
277,460 |
|
|
Engineering and development |
19,671 |
|
|
18,379 |
|
|
87,601 |
|
|
78,772 |
|
|
General
and administrative |
34,587 |
|
|
33,043 |
|
|
143,095 |
|
|
163,972 |
|
|
Impairment of goodwill |
— |
|
|
12,129 |
|
|
— |
|
|
12,129 |
|
|
Transaction expenses |
27 |
|
|
— |
|
|
32,284 |
|
|
773 |
|
|
Total operating
expense |
122,852 |
|
|
129,857 |
|
|
566,491 |
|
|
533,106 |
|
|
Income (loss) from
operations |
24,260 |
|
|
14,660 |
|
|
(39,340 |
) |
|
39,831 |
|
|
Other income
(expense): |
|
|
|
|
|
|
|
Other
income (loss), net |
(4,703 |
) |
|
— |
|
|
1,862 |
|
|
(600 |
) |
|
Interest
income |
138 |
|
|
230 |
|
|
576 |
|
|
736 |
|
|
Interest
expense |
(40,315 |
) |
|
(36,120 |
) |
|
(152,888 |
) |
|
(157,142 |
) |
|
Total other
expense—net |
(44,880 |
) |
|
(35,890 |
) |
|
(150,450 |
) |
|
(157,006 |
) |
|
Loss before income
taxes and equity earnings of unconsolidated entities |
(20,620 |
) |
|
(21,230 |
) |
|
(189,790 |
) |
|
(117,175 |
) |
|
Income tax expense
(benefit) |
11,362 |
|
|
(28,665 |
) |
|
(109,858 |
) |
|
(17,281 |
) |
|
(Loss) income before
equity earnings of unconsolidated entities |
(31,982 |
) |
|
7,435 |
|
|
(79,932 |
) |
|
(99,894 |
) |
|
Equity loss (income) of
unconsolidated entities, net of tax |
100 |
|
|
(38 |
) |
|
1,297 |
|
|
(110 |
) |
|
Net (loss) income |
$ |
(32,082 |
) |
|
$ |
7,473 |
|
|
$ |
(81,229 |
) |
|
$ |
(99,784 |
) |
|
Net loss attributable
to non-controlling interest |
(841 |
) |
|
— |
|
|
(15,167 |
) |
|
277 |
|
|
Excess accretion of
non-controlling interest |
3,624 |
|
|
— |
|
|
6,769 |
|
|
7,247 |
|
|
Total net income (loss)
attributable to non-controlling interest |
2,783 |
|
|
— |
|
|
(8,398 |
) |
|
7,524 |
|
|
Net (loss) income
attributable to Endurance International Group Holdings, Inc. |
$ |
(34,865 |
) |
|
$ |
7,473 |
|
|
$ |
(72,831 |
) |
|
$ |
(107,308 |
) |
|
Comprehensive
loss: |
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
(1,591 |
) |
|
106 |
|
|
(597 |
) |
|
3,091 |
|
|
Unrealized gain (loss) on cash flow hedge, net of taxes of $97 and
$192, and $(792) and $11 for the three and twelve months ended
December 31, 2016 and 2017, respectively |
515 |
|
|
343 |
|
|
(1,351 |
) |
|
34 |
|
|
Total comprehensive
(loss) income |
$ |
(35,941 |
) |
|
$ |
7,923 |
|
|
$ |
(74,779 |
) |
|
$ |
(104,183 |
) |
|
Net (loss) income per
share attributable to Endurance International Group Holdings,
Inc.—basic |
$ |
(0.26 |
) |
|
$ |
0.05 |
|
|
$ |
(0.55 |
) |
|
$ |
(0.78 |
) |
|
Net (loss) income per
share attributable to Endurance International Group Holdings,
Inc.—diluted |
$ |
(0.26 |
) |
|
$ |
0.05 |
|
|
$ |
(0.55 |
) |
|
$ |
(0.78 |
) |
|
Weighted-average number
of common shares used in computing net loss per share attributable
to Endurance International Group Holdings, Inc.—basic |
134,453,029 |
|
|
138,921,118 |
|
|
133,415,732 |
|
|
137,322,201 |
|
|
Weighted-average number
of common shares used in computing net loss per share attributable
to Endurance International Group Holdings, Inc.—diluted |
134,453,029 |
|
|
141,307,988 |
|
|
133,415,732 |
|
|
137,322,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endurance International Group Holdings,
Inc.Consolidated Statements of Cash
Flows(unaudited)(in
thousands) |
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net
(loss) income |
$ |
(32,082 |
) |
|
$ |
7,473 |
|
|
$ |
(81,229 |
) |
|
$ |
(99,784 |
) |
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation of property and equipment |
13,418 |
|
|
14,452 |
|
|
60,360 |
|
|
55,185 |
|
Amortization of other intangible assets from acquisitions |
37,883 |
|
|
35,800 |
|
|
143,562 |
|
|
140,354 |
|
Amortization of deferred financing costs |
1,751 |
|
|
1,913 |
|
|
6,073 |
|
|
7,316 |
|
Amortization of net present value of deferred consideration |
191 |
|
|
128 |
|
|
2,617 |
|
|
632 |
|
Amortization of original issuance discount |
854 |
|
|
1,069 |
|
|
2,970 |
|
|
3,860 |
|
Impairment of long-lived assets |
754 |
|
|
4,883 |
|
|
9,039 |
|
|
18,731 |
|
Impairment of investments |
— |
|
|
— |
|
|
— |
|
|
600 |
|
Impairment of goodwill |
— |
|
|
12,129 |
|
|
— |
|
|
12,129 |
|
Stock-based compensation |
10,049 |
|
|
11,252 |
|
|
58,267 |
|
|
60,001 |
|
Deferred
tax expense (benefit) |
11,305 |
|
|
(26,700 |
) |
|
(113,242 |
) |
|
(20,258 |
) |
Gain on
sale of assets |
(75 |
) |
|
2 |
|
|
(243 |
) |
|
(315 |
) |
(Gain)
loss from unconsolidated entities |
4,703 |
|
|
(38 |
) |
|
(1,862 |
) |
|
(110 |
) |
(Gain)
loss of unconsolidated entities |
100 |
|
|
(110 |
) |
|
1,297 |
|
|
— |
|
Financing
costs expensed |
— |
|
|
— |
|
|
— |
|
|
5,487 |
|
Loss on
early extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
992 |
|
Dividend
from minority interest |
50 |
|
|
— |
|
|
100 |
|
|
100 |
|
(Gain)
loss from change in deferred consideration |
13 |
|
|
— |
|
|
(20 |
) |
|
— |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable |
(2,996 |
) |
|
(2,230 |
) |
|
(1,620 |
) |
|
(3,102 |
) |
Prepaid
expenses and other current assets |
4,274 |
|
|
2,344 |
|
|
(4,932 |
) |
|
1,834 |
|
Accounts
payable and accrued expenses |
7,164 |
|
|
16,695 |
|
|
19,458 |
|
|
9,386 |
|
Deferred
revenue |
(4,199 |
) |
|
(6,765 |
) |
|
54,366 |
|
|
8,235 |
|
Net cash provided by
operating activities |
53,157 |
|
|
72,297 |
|
|
154,961 |
|
|
201,273 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Businesses acquired in purchase transaction, net of cash
acquired |
— |
|
|
— |
|
|
(889,634 |
) |
|
— |
|
Purchases
of property and equipment |
(7,942 |
) |
|
(10,967 |
) |
|
(37,259 |
) |
|
(43,062 |
) |
Cash paid
for minority investment |
— |
|
|
— |
|
|
(5,600 |
) |
|
— |
|
Proceeds
from sale of assets |
— |
|
|
238 |
|
|
676 |
|
|
530 |
|
Proceeds
from note receivable |
434 |
|
|
— |
|
|
— |
|
|
— |
|
Purchases
of intangible assets |
— |
|
|
— |
|
|
(27 |
) |
|
(1,966 |
) |
Net
(deposits) and withdrawals of principal balances in restricted cash
accounts |
181 |
|
|
22 |
|
|
(557 |
) |
|
677 |
|
Net cash used in
investing activities |
(7,327 |
) |
|
(10,707 |
) |
|
(932,401 |
) |
|
(43,821 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Proceeds
from issuance of term loan |
— |
|
|
— |
|
|
1,056,178 |
|
|
1,693,007 |
|
Repayment
of term loan |
(12,425 |
) |
|
(64,487 |
) |
|
(55,200 |
) |
|
(1,797,634 |
) |
Proceeds
from borrowing of revolver |
5,000 |
|
|
— |
|
|
54,500 |
|
|
— |
|
Repayment
of revolver |
(38,500 |
) |
|
— |
|
|
(121,500 |
) |
|
— |
|
Payment
of financing costs |
— |
|
|
— |
|
|
(52,561 |
) |
|
(6,304 |
) |
Payment
of deferred consideration |
(7,964 |
) |
|
(25 |
) |
|
(51,044 |
) |
|
(5,433 |
) |
Payment
of redeemable non-controlling interest liability |
— |
|
|
— |
|
|
(33,425 |
) |
|
(25,000 |
) |
Principal
payments on capital lease obligations |
(1,520 |
) |
|
(1,711 |
) |
|
(5,892 |
) |
|
(7,390 |
) |
Proceeds
from exercise of stock options |
260 |
|
|
501 |
|
|
2,564 |
|
|
2,049 |
|
Capital
investment from minority interest partner |
— |
|
|
— |
|
|
2,776 |
|
|
— |
|
Net cash provided by
(used in) financing activities |
(55,149 |
) |
|
(65,722 |
) |
|
796,396 |
|
|
(146,705 |
) |
Net effect of exchange
rate on cash and cash equivalents |
(233 |
) |
|
(6 |
) |
|
1,610 |
|
|
2,150 |
|
Net
increase in cash and cash equivalents |
(9,552 |
) |
|
(4,138 |
) |
|
20,566 |
|
|
12,897 |
|
Cash and cash
equivalents: |
|
|
|
|
|
|
|
Beginning
of period |
63,148 |
|
|
70,521 |
|
|
33,030 |
|
|
53,596 |
|
End of
period |
$ |
53,596 |
|
|
$ |
66,383 |
|
|
$ |
53,596 |
|
|
$ |
66,493 |
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
Interest paid |
$ |
27,882 |
|
|
$ |
22,881 |
|
|
$ |
119,063 |
|
|
$ |
141,157 |
|
Income taxes paid |
$ |
879 |
|
|
$ |
(589 |
) |
|
$ |
4,278 |
|
|
$ |
3,369 |
|
Supplemental disclosure
of non-cash financing activities: |
|
|
|
|
|
|
|
Shares or awards issued
in connection with acquisitions |
$ |
— |
|
|
$ |
— |
|
|
$ |
5,395 |
|
|
$ |
— |
|
Assets acquired under
capital lease |
$ |
— |
|
|
$ |
12,408 |
|
|
$ |
— |
|
|
$ |
15,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
Net (loss)
income |
$ |
(32,082 |
) |
|
$ |
7,473 |
|
|
$ |
(81,229 |
) |
|
$ |
(99,784 |
) |
Interest expense,
net(1) |
40,177 |
|
|
35,890 |
|
|
152,312 |
|
|
156,406 |
|
Income tax expense
(benefit) |
11,362 |
|
|
(28,665 |
) |
|
(109,858 |
) |
|
(17,281 |
) |
Depreciation |
13,418 |
|
|
14,452 |
|
|
60,360 |
|
|
55,185 |
|
Amortization of other
intangible assets |
37,883 |
|
|
35,800 |
|
|
143,562 |
|
|
140,354 |
|
Stock-based
compensation |
10,049 |
|
|
11,252 |
|
|
58,267 |
|
|
60,001 |
|
Restructuring
expenses |
582 |
|
|
1,226 |
|
|
24,224 |
|
|
15,810 |
|
Transaction expenses
and charges |
27 |
|
|
— |
|
|
32,284 |
|
|
773 |
|
(Gain) loss of
unconsolidated entities(2) |
4,803 |
|
|
(38 |
) |
|
(565 |
) |
|
(110 |
) |
Impairment of other
long-lived assets |
754 |
|
|
17,012 |
|
|
9,039 |
|
|
31,460 |
|
SEC investigations
reserve |
— |
|
|
— |
|
|
— |
|
|
8,000 |
|
Adjusted
EBITDA |
$ |
86,973 |
|
|
$ |
94,402 |
|
|
$ |
288,396 |
|
|
$ |
350,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issue discounts and interest income.(2)
The (gain) loss of unconsolidated entities includes our
proportionate share of net (gains) losses from unconsolidated
entities, (gains) losses from revaluation of our existing
investments to their implied fair values if and when we obtain
control of the equity investee, and impairment charges, if
any.
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 EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
Cash flow from
operations |
$ |
53,157 |
|
|
$ |
72,407 |
|
|
$ |
154,961 |
|
|
$ |
201,273 |
|
Less: |
|
|
|
|
|
|
|
Capital expenditures
and capital lease obligations (1) |
(9,462 |
) |
|
(12,678 |
) |
|
(43,151 |
) |
|
(50,452 |
) |
|
|
|
|
|
|
|
|
Free cash
flow |
$ |
43,695 |
|
|
$ |
59,729 |
|
|
$ |
111,810 |
|
|
$ |
150,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Capital expenditures during the three and twelve months
ended December 31, 2016 includes $1.5 million and $5.9 million of
principal payments under a three year capital lease for software.
Capital expenditures during the three and twelve months ended
December 31, 2017 includes $1.7 million and $7.4 million of
principal payments under a two year capital lease for software. The
remaining balance on the capital lease is $15.3 million as of
December 31, 2017.
Average Revenue Per Subscriber - Calculation and Segment
Detail
Starting with the fourth quarter of 2017, we will present our
financial results in the following three segments:
- Web presence. The web presence segment consists primarily of
our web hosting brands and related products such as 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 product.
- Domain. The domain segment consists of domain-focused brands
and certain web hosting brands that are aligned with the 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.
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 December 31, |
|
Twelve Months Ended December 31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
Consolidated
revenue |
$ |
292,123 |
|
|
$ |
294,250 |
|
|
$ |
1,111,142 |
|
|
$ |
1,176,867 |
|
Consolidated total
subscribers |
5,371 |
|
|
5,051 |
|
|
5,371 |
|
|
5,051 |
|
Consolidated average
subscribers |
5,405 |
|
|
5,087 |
|
|
5,283 |
|
|
5,211 |
|
Consolidated
average revenue per subscriber (ARPS) |
$ |
18.02 |
|
|
$ |
19.28 |
|
|
$ |
17.53 |
|
|
$ |
18.82 |
|
|
|
|
|
|
|
|
|
Web presence
revenue |
161,878 |
|
|
$ |
158,332 |
|
|
648,732 |
|
|
$ |
641,993 |
|
Web presence
subscribers |
4,198 |
|
|
3,849 |
|
|
4,198 |
|
|
3,849 |
|
Web presence average
subscribers |
4,240 |
|
|
3,903 |
|
|
4,233 |
|
|
4,024 |
|
Web presence
ARPS |
$ |
12.73 |
|
|
$ |
13.52 |
|
|
$ |
12.77 |
|
|
$ |
13.29 |
|
|
|
|
|
|
|
|
|
Email marketing
revenue |
97,153 |
|
|
$ |
102,849 |
|
|
326,808 |
|
|
$ |
401,250 |
|
Email marketing
subscribers |
544 |
|
|
519 |
|
|
544 |
|
|
519 |
|
Email marketing average
subscribers |
545 |
|
|
521 |
|
|
494 |
|
|
531 |
|
Email marketing
ARPS |
$ |
59.43 |
|
|
$ |
65.79 |
|
|
$ |
55.11 |
|
|
$ |
62.92 |
|
|
|
|
|
|
|
|
|
Domain revenue |
33,092 |
|
|
$ |
33,069 |
|
|
135,602 |
|
|
$ |
133,624 |
|
Domain subscribers |
629 |
|
|
683 |
|
|
629 |
|
|
683 |
|
Domain average
subscribers |
621 |
|
|
663 |
|
|
556 |
|
|
656 |
|
Domain
ARPS |
$ |
17.77 |
|
|
$ |
16.63 |
|
|
$ |
20.34 |
|
|
$ |
16.98 |
|
|
|
|
The following table presents a reconciliation by segment of net
income (loss) calculated in accordance with GAAP to adjusted EBITDA
(all data in thousands):
|
Three Months Ended December 31,
2017 |
|
Web presence |
Email marketing |
Domain |
Total |
|
|
Revenue |
$ |
158,332 |
|
$ |
102,849 |
|
$ |
33,069 |
|
$ |
294,250 |
|
Gross profit |
$ |
74,387 |
|
$ |
66,760 |
|
$ |
3,370 |
|
$ |
144,517 |
|
|
|
|
|
|
Net income (loss) |
$ |
2,971 |
|
$ |
(2,589 |
) |
$ |
7,091 |
|
$ |
7,473 |
|
Less: |
|
|
|
|
Interest expense,
net(1) |
$ |
16,614 |
|
$ |
18,702 |
|
$ |
574 |
|
$ |
35,890 |
|
Income tax expense
(benefit) |
$ |
(11,304 |
) |
$ |
9,973 |
|
$ |
(27,334 |
) |
$ |
(28,665 |
) |
Depreciation |
$ |
10,233 |
|
$ |
3,280 |
|
$ |
939 |
|
$ |
14,452 |
|
Amortization of other
intangible assets |
$ |
15,846 |
|
$ |
18,770 |
|
$ |
1,184 |
|
$ |
35,800 |
|
Stock-based
compensation |
$ |
8,618 |
|
$ |
1,542 |
|
$ |
1,092 |
|
$ |
11,252 |
|
Restructuring
expenses |
$ |
187 |
|
$ |
838 |
|
$ |
201 |
|
$ |
1,226 |
|
Transaction expenses
and charges |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Gain of unconsolidated
entities(2) |
$ |
(38 |
) |
$ |
— |
|
$ |
— |
|
$ |
(38 |
) |
Impairment of other
long-lived assets |
$ |
— |
|
$ |
— |
|
$ |
17,012 |
|
$ |
17,012 |
|
SEC investigations
reserve |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Adjusted EBITDA |
$ |
43,127 |
|
$ |
50,516 |
|
$ |
759 |
|
$ |
94,402 |
|
|
|
|
|
|
|
Twelve Months EndedDecember
31, 2017 |
|
Web presence |
Email marketing |
Domain |
Total |
|
|
|
|
|
Revenue |
$ |
641,993 |
|
$ |
401,250 |
|
$ |
133,624 |
|
$ |
1,176,867 |
|
Gross profit |
$ |
298,687 |
|
$ |
254,941 |
|
$ |
19,309 |
|
$ |
572,937 |
|
|
|
|
|
|
Net loss |
$ |
(70,375 |
) |
$ |
(10,615 |
) |
$ |
(18,794 |
) |
$ |
(99,784 |
) |
Plus: |
|
|
|
|
Interest expense,
net(1) |
$ |
67,491 |
|
$ |
86,914 |
|
$ |
2,001 |
|
$ |
156,406 |
|
Income tax expense
(benefit) |
$ |
2,575 |
|
$ |
5,152 |
|
$ |
(25,008 |
) |
$ |
(17,281 |
) |
Depreciation |
$ |
37,634 |
|
$ |
13,912 |
|
$ |
3,639 |
|
$ |
55,185 |
|
Amortization of other
intangible assets |
$ |
60,277 |
|
$ |
74,467 |
|
$ |
5,610 |
|
$ |
140,354 |
|
Stock-based
compensation |
$ |
46,641 |
|
$ |
6,934 |
|
$ |
6,426 |
|
$ |
60,001 |
|
Restructuring
expenses |
$ |
9,131 |
|
$ |
5,581 |
|
$ |
1,098 |
|
$ |
15,810 |
|
Transaction expenses
and charges |
$ |
— |
|
$ |
773 |
|
$ |
— |
|
$ |
773 |
|
Gain of unconsolidated
entities(2) |
$ |
(110 |
) |
$ |
— |
|
$ |
— |
|
$ |
(110 |
) |
Impairment of other
long-lived assets |
$ |
600 |
|
$ |
— |
|
$ |
30,860 |
|
$ |
31,460 |
|
SEC investigations
reserve |
$ |
4,323 |
|
$ |
2,751 |
|
$ |
926 |
|
$ |
8,000 |
|
Adjusted EBITDA |
$ |
158,187 |
|
$ |
185,869 |
|
$ |
6,758 |
|
$ |
350,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2016 |
|
Web presence |
Email marketing |
Domain |
Total |
|
|
Revenue |
$ |
161,877 |
|
$ |
97,153 |
|
$ |
33,093 |
|
$ |
292,123 |
|
Gross profit |
$ |
77,622 |
|
$ |
58,734 |
|
$ |
10,756 |
|
$ |
147,112 |
|
|
|
|
|
|
Net loss |
$ |
(27,825 |
) |
$ |
(3,923 |
) |
$ |
(334 |
) |
$ |
(32,082 |
) |
Plus: |
|
|
|
|
Interest expense,
net(1) |
$ |
16,866 |
|
$ |
22,671 |
|
$ |
640 |
|
$ |
40,177 |
|
Income tax expense
(benefit) |
$ |
13,555 |
|
$ |
(2,357 |
) |
$ |
164 |
|
$ |
11,362 |
|
Depreciation |
$ |
8,580 |
|
$ |
4,053 |
|
$ |
785 |
|
$ |
13,418 |
|
Amortization of other
intangible assets |
$ |
18,057 |
|
$ |
18,252 |
|
$ |
1,574 |
|
$ |
37,883 |
|
Stock-based
compensation |
$ |
7,411 |
|
$ |
1,964 |
|
$ |
674 |
|
$ |
10,049 |
|
Restructuring
expenses |
$ |
344 |
|
$ |
238 |
|
$ |
— |
|
$ |
582 |
|
Transaction expenses
and charges |
$ |
27 |
|
$ |
— |
|
$ |
— |
|
$ |
27 |
|
Loss of unconsolidated
entities(2) |
$ |
4,803 |
|
$ |
— |
|
$ |
— |
|
$ |
4,803 |
|
Impairment of other
long-lived assets |
$ |
754 |
|
$ |
— |
|
$ |
— |
|
$ |
754 |
|
Adjusted EBITDA |
$ |
42,572 |
|
$ |
40,898 |
|
$ |
3,503 |
|
$ |
86,973 |
|
|
|
|
|
|
|
Twelve months ended December 31,
2016 |
|
Web presence |
Email marketing |
Domain |
Total |
|
|
Revenue |
$ |
648,732 |
|
$ |
326,808 |
|
$ |
135,602 |
|
$ |
1,111,142 |
|
Gross profit |
$ |
309,116 |
|
$ |
173,163 |
|
$ |
44,872 |
|
$ |
527,151 |
|
|
|
|
|
|
Net loss |
$ |
(24,382 |
) |
$ |
(55,857 |
) |
$ |
(990 |
) |
$ |
(81,229 |
) |
Plus: |
|
|
|
|
Interest expense,
net(1) |
$ |
68,617 |
|
$ |
81,469 |
|
$ |
2,226 |
|
$ |
152,312 |
|
Income tax expense
(benefit) |
$ |
(79,632 |
) |
$ |
(33,543 |
) |
$ |
3,317 |
|
$ |
(109,858 |
) |
Depreciation |
$ |
33,590 |
|
$ |
23,747 |
|
$ |
3,023 |
|
$ |
60,360 |
|
Amortization of other
intangible assets |
$ |
72,733 |
|
$ |
64,679 |
|
$ |
6,150 |
|
$ |
143,562 |
|
Stock-based
compensation |
$ |
41,481 |
|
$ |
12,403 |
|
$ |
4,383 |
|
$ |
58,267 |
|
Restructuring
expenses |
$ |
1,625 |
|
$ |
22,379 |
|
$ |
220 |
|
$ |
24,224 |
|
Transaction expenses
and charges |
$ |
31,260 |
|
$ |
984 |
|
$ |
40 |
|
$ |
32,284 |
|
Gain of unconsolidated
entities(2) |
$ |
(565 |
) |
$ |
— |
|
$ |
— |
|
$ |
(565 |
) |
Impairment of other
long-lived assets |
$ |
9,039 |
|
$ |
— |
|
$ |
— |
|
$ |
9,039 |
|
Adjusted EBITDA |
$ |
153,766 |
|
$ |
116,261 |
|
$ |
18,369 |
|
$ |
288,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issue discounts and interest income.(2)
The (gain) loss of unconsolidated entities includes our
proportionate share of net (gains) losses from unconsolidated
entities, (gains) losses from revaluation of our existing
investments to their implied fair values if and when we obtain
control of the equity investee, and impairment charges, if any.
GAAP to Non-GAAP Reconciliation of Fiscal Year 2018
Guidance (as of February 13, 2018) - Adjusted EBITDA
The following table reflects the reconciliation of fiscal year
2018 estimated net loss calculated in accordance with GAAP to
fiscal year 2018 guidance for adjusted EBITDA. All figures shown
are approximate.
($ in millions) |
Twelve Months Ending December 31,
2018 |
Estimated net
loss |
$ |
(27 |
) |
$ |
(7 |
) |
Estimated interest
expense (net) |
135 |
|
135 |
|
Estimated income tax
expense (benefit) |
8 |
|
8 |
|
Estimated
depreciation |
55 |
|
55 |
|
Estimated amortization
of acquired intangible assets |
100 |
|
100 |
|
Estimated stock-based
compensation |
35 |
|
35 |
|
Estimated restructuring
expenses |
4 |
|
4 |
|
Estimated transaction
expenses and charges |
— |
|
— |
|
Estimated (gain) loss
of unconsolidated entities |
— |
|
— |
|
Estimated impairment of
other long-lived assets |
— |
|
— |
|
Adjusted EBITDA
guidance |
$ |
310 |
|
$ |
330 |
|
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation of Fiscal Year 2018
Guidance (as of February 13, 2018) - Free Cash Flow
The following table reflects the reconciliation of fiscal year
2018 estimated cash flow from operations calculated in accordance
with GAAP to fiscal year 2018 guidance for free cash flow. All
figures shown are approximate.
($ in millions) |
Twelve Months Ending December 31,
2018 |
Estimated cash
flow from operations |
$ |
178 |
|
Estimated capital
expenditures and capital lease obligations |
|
(58 |
) |
Free cash flow
guidance |
$ |
120 |
|
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