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 third quarter ended September 30,
2019.
“We are pleased with the progress we made in the third quarter,
which resulted in positive net units as an enterprise. During
the quarter we continued to deliver increased solution value to our
customers with focused investment on our strategic brands,”
commented Jeffrey H. Fox, president and chief executive officer of
Endurance International Group. “We believe our net subscriber and
revenue trend reflects continued progress toward our goal of
returning our multi-brand scale SMB platform to growth.”
Third Quarter 2019 Financial Highlights
- Revenue for the third quarter of 2019 was $277.2 million, a
decrease of 2.3 percent compared to $283.8 million for the third
quarter of 2018.
- Net income for the third quarter of 2019 was $7.8 million, or
$0.05 per diluted share, compared to net loss of $6.3 million, or
$(0.04) per diluted share, for the third quarter of 2018.
- Adjusted EBITDA for the third quarter of 2019 was $80.6
million, a decrease of 7.9 percent compared to $87.5 million for
the third quarter of 2018.
- Cash flow from operations for the third quarter of 2019 was
$41.0 million, a decrease of 20.2 percent compared to $51.3 million
for the third quarter of 2018.
- Free cash flow, defined as cash flow from operations less
capital expenditures and financed equipment obligations, for the
third quarter of 2019 was $27.8 million, a decrease of 31.5 percent
compared to $40.7 million for the third quarter of 2018.
Third Quarter 2019 Operating Highlights
- Total subscribers on platform at September 30, 2019 were
approximately 4.780 million, compared to approximately 4.852
million subscribers at September 30, 2018 and approximately
4.802 million subscribers at December 31, 2018. Total
subscribers at the end of the quarter increased by approximately
10,700 as compared to the second quarter, and included
approximately 1,300 subscribers from the September 2019 acquisition
of Ecomdash disclosed in our Form 8-K filed on September 16, 2019.
See “Total Subscribers” below.
- Average revenue per subscriber, or ARPS, for the third quarter
of 2019 was $19.35, compared to $19.36 for the third quarter of
2018 and $19.50 for the fourth quarter of 2018. See “Average
Revenue Per Subscriber” below.
Fiscal 2019 Guidance
The Company is revising its guidance for the full year ending
December 31, 2019. As of the date of this release,
October 31, 2019, the Company expects:
|
|
2018 Actualas Reported |
|
Prior Guidance |
|
Revised Guidance(as of October 31,
2019) |
| GAAP revenue |
$1.145 billion |
|
$1.120 to $1.140 billion |
|
~$1.115 billion |
| Adjusted EBITDA |
$338 million |
|
$300 to $320 million |
|
$300 to $310 million |
| Free cash flow |
$129 million |
|
$110 to $120 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.
Conference Call and Webcast Information
Endurance International Group’s third quarter 2019 financial
results teleconference and webcast is scheduled to begin at 8:00
a.m. EDT on Thursday, October 31, 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
third quarter of 2019, these adjustments had a positive impact of
approximately 3,000 to 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
reflecting our belief that our net subscriber and revenue trend
reflects continued progress toward our goal of returning to growth
, our financial guidance for fiscal year 2019, 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 a return
to growth or other anticipated benefits to our business; the
possibility that we will experience decreases in, or fail to grow,
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 3,700 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 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 |
|
September 30, 2019 |
| Assets |
|
|
(unaudited) |
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
88,644 |
|
|
$ |
84,465 |
|
|
Restricted cash |
1,932 |
|
|
1,832 |
|
|
Accounts receivable |
12,205 |
|
|
12,139 |
|
|
Prepaid domain name registry fees |
56,779 |
|
|
56,555 |
|
|
Prepaid commissions |
41,458 |
|
|
40,528 |
|
|
Prepaid and refundable taxes |
7,235 |
|
|
13,070 |
|
|
Prepaid expenses and other current assets |
27,855 |
|
|
23,137 |
|
| Total current assets |
236,108 |
|
|
231,726 |
|
|
Property and equipment—net |
92,275 |
|
|
86,318 |
|
|
Operating lease right-of-use assets |
— |
|
|
98,064 |
|
|
Goodwill |
1,849,065 |
|
|
1,854,829 |
|
|
Other intangible assets—net |
352,516 |
|
|
273,329 |
|
|
Deferred financing costs—net |
2,656 |
|
|
2,000 |
|
|
Investments |
15,000 |
|
|
15,000 |
|
|
Prepaid domain name registry fees, net of current portion |
11,207 |
|
|
11,139 |
|
|
Prepaid commissions, net of current portion |
42,472 |
|
|
47,776 |
|
|
Other assets |
5,208 |
|
|
2,292 |
|
| Total assets |
$ |
2,606,507 |
|
|
$ |
2,622,473 |
|
| Liabilities and
stockholders’ equity |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
12,449 |
|
|
$ |
10,171 |
|
|
Accrued expenses |
79,279 |
|
|
67,267 |
|
|
Accrued taxes |
2,498 |
|
|
1,783 |
|
|
Accrued interest |
25,259 |
|
|
14,526 |
|
|
Deferred revenue |
371,758 |
|
|
375,729 |
|
|
Operating lease liabilities—short term |
— |
|
|
22,474 |
|
|
Current portion of notes payable |
31,606 |
|
|
31,606 |
|
|
Current portion of financed equipment |
8,379 |
|
|
2,637 |
|
|
Deferred consideration—short term |
2,425 |
|
|
2,181 |
|
|
Other current liabilities |
3,147 |
|
|
2,216 |
|
| Total current liabilities |
536,800 |
|
|
530,590 |
|
| Long-term deferred revenue |
96,140 |
|
|
99,257 |
|
| Operating lease liabilities—long
term |
— |
|
|
84,594 |
|
| Notes payable—long term, net of
original issue discounts of $21,349 and $18,013 and deferred
financing costs of $31,992 and $27,318, respectively |
1,770,055 |
|
|
1,703,065 |
|
| Deferred tax liability |
16,457 |
|
|
20,231 |
|
| Deferred consideration—long
term |
1,364 |
|
|
— |
|
| Other liabilities |
11,237 |
|
|
6,308 |
|
| Total liabilities |
2,432,053 |
|
|
2,444,045 |
|
| 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 146,140,876 shares issued at December 31, 2018 and
September 30, 2019, respectively; 143,444,178 and 146,140,876
outstanding at December 31, 2018 and September 30, 2019,
respectively |
14 |
|
|
15 |
|
|
Additional paid-in capital |
961,235 |
|
|
988,773 |
|
|
Accumulated other comprehensive loss |
(3,211 |
) |
|
(4,876 |
) |
|
Accumulated deficit |
(783,584 |
) |
|
(805,484 |
) |
| Total stockholders’ equity |
174,454 |
|
|
178,428 |
|
| Total liabilities and
stockholders’ equity |
$ |
2,606,507 |
|
|
$ |
2,622,473 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
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 September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Revenue |
$ |
283,770 |
|
|
$ |
277,193 |
|
|
$ |
862,896 |
|
|
$ |
836,080 |
|
| Cost of revenue (including
impairment of $0 and $17,892, respectively, for the three and nine
months ended September 30, 2019) |
128,945 |
|
|
120,755 |
|
|
393,597 |
|
|
384,196 |
|
| Gross profit |
154,825 |
|
|
156,438 |
|
|
469,299 |
|
|
451,884 |
|
| Operating expense: |
|
|
|
|
|
|
|
|
Sales and marketing |
63,831 |
|
|
59,143 |
|
|
197,733 |
|
|
191,221 |
|
|
Engineering and development |
22,683 |
|
|
28,257 |
|
|
64,559 |
|
|
77,299 |
|
|
General and administrative |
25,693 |
|
|
30,309 |
|
|
95,212 |
|
|
92,826 |
|
| Total operating expense |
112,207 |
|
|
117,709 |
|
|
357,504 |
|
|
361,346 |
|
| Income from operations |
42,618 |
|
|
38,729 |
|
|
111,795 |
|
|
90,538 |
|
| Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
289 |
|
|
305 |
|
|
720 |
|
|
910 |
|
|
Interest expense |
(37,527 |
) |
|
(36,057 |
) |
|
(111,923 |
) |
|
(110,308 |
) |
| Total other expense—net |
(37,238 |
) |
|
(35,752 |
) |
|
(111,203 |
) |
|
(109,398 |
) |
| Income (loss) before income taxes
and equity earnings of unconsolidated entities |
5,380 |
|
|
2,977 |
|
|
592 |
|
|
(18,860 |
) |
| Income tax expense (benefit) |
11,715 |
|
|
(4,839 |
) |
|
8,826 |
|
|
3,040 |
|
| (Loss) income before equity
earnings of unconsolidated entities |
(6,335 |
) |
|
7,816 |
|
|
(8,234 |
) |
|
(21,900 |
) |
| Equity loss of unconsolidated
entities, net of tax |
— |
|
|
— |
|
|
2 |
|
|
— |
|
| Net (loss) income |
$ |
(6,335 |
) |
|
$ |
7,816 |
|
|
$ |
(8,236 |
) |
|
$ |
(21,900 |
) |
| Comprehensive (loss) income: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
(644 |
) |
|
(1,001 |
) |
|
(2,489 |
) |
|
(1,054 |
) |
|
Unrealized gain (loss) on cash flow hedge, net of tax (expense)
benefit of ($182) and $626 for the three and nine months ended
September 30, 2018, respectively, and ($70) and $200 for the three
and nine months ended September 30, 2019, respectively |
812 |
|
|
240 |
|
|
1,996 |
|
|
(611 |
) |
| Total comprehensive (loss)
income |
$ |
(6,167 |
) |
|
$ |
7,055 |
|
|
$ |
(8,729 |
) |
|
$ |
(23,565 |
) |
| Basic net (loss) income per
share |
$ |
(0.04 |
) |
|
$ |
0.05 |
|
|
$ |
(0.06 |
) |
|
$ |
(0.15 |
) |
| Diluted net (loss) income per
share |
$ |
(0.04 |
) |
|
$ |
0.05 |
|
|
$ |
(0.06 |
) |
|
$ |
(0.15 |
) |
| Weighted-average common shares
used in computing net (loss) income per share: |
|
|
|
|
|
|
|
| Basic |
143,107,122 |
|
|
145,951,755 |
|
|
141,946,574 |
|
|
144,932,834 |
|
| Diluted |
143,107,122 |
|
|
146,301,595 |
|
|
141,946,574 |
|
|
144,932,834 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Endurance International Group Holdings,
Inc.Consolidated Statements of Cash
Flows(unaudited) (in thousands)
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(6,335 |
) |
|
$ |
7,816 |
|
|
$ |
(8,236 |
) |
|
$ |
(21,900 |
) |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
11,889 |
|
|
11,280 |
|
|
36,753 |
|
|
33,385 |
|
|
Amortization of other intangible assets |
26,177 |
|
|
21,668 |
|
|
77,890 |
|
|
64,137 |
|
|
Impairment of long-lived assets |
— |
|
|
— |
|
|
— |
|
|
17,892 |
|
|
Amortization of deferred financing costs |
1,722 |
|
|
1,822 |
|
|
4,708 |
|
|
5,331 |
|
|
Amortization of net present value of deferred consideration |
60 |
|
|
23 |
|
|
311 |
|
|
143 |
|
|
Amortization of original issue discounts |
1,083 |
|
|
1,138 |
|
|
3,209 |
|
|
3,336 |
|
|
Stock-based compensation |
7,550 |
|
|
9,143 |
|
|
21,932 |
|
|
27,513 |
|
|
Deferred tax expense |
13,323 |
|
|
(685 |
) |
|
8,839 |
|
|
1,942 |
|
|
(Gain) loss on sale of assets |
(70 |
) |
|
(8 |
) |
|
191 |
|
|
128 |
|
|
Loss from unconsolidated entities |
— |
|
|
— |
|
|
2 |
|
|
— |
|
|
Financing costs expensed |
— |
|
|
— |
|
|
1,228 |
|
|
— |
|
|
Loss on early extinguishment of debt |
— |
|
|
— |
|
|
331 |
|
|
— |
|
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
|
|
|
|
|
Accounts receivable |
(2,053 |
) |
|
827 |
|
|
1,687 |
|
|
34 |
|
|
Prepaid and refundable taxes |
(2,344 |
) |
|
(6,633 |
) |
|
(3,446 |
) |
|
(5,908 |
) |
|
Prepaid expenses and other current assets |
11,371 |
|
|
2,780 |
|
|
2,703 |
|
|
5,108 |
|
|
Leases right-of-use asset, net |
— |
|
|
(258 |
) |
|
— |
|
|
395 |
|
|
Accounts payable and accrued expenses |
(6,341 |
) |
|
(8,357 |
) |
|
(18,011 |
) |
|
(23,492 |
) |
|
Deferred revenue |
(4,691 |
) |
|
395 |
|
|
3,502 |
|
|
7,636 |
|
| Net cash provided by operating
activities |
51,341 |
|
|
40,951 |
|
|
133,593 |
|
|
115,680 |
|
| Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Businesses acquired in purchase transactions, net of cash
acquired |
— |
|
|
(8,875 |
) |
|
— |
|
|
(8,875 |
) |
|
Purchases of property and equipment |
(8,962 |
) |
|
(10,632 |
) |
|
(22,343 |
) |
|
(26,796 |
) |
|
Proceeds from sale of assets |
6 |
|
|
1 |
|
|
6 |
|
|
1 |
|
| Net cash used in investing
activities |
(8,956 |
) |
|
(19,506 |
) |
|
(22,337 |
) |
|
(35,670 |
) |
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of term loan and notes, net of original
issue discounts |
— |
|
|
— |
|
|
1,580,305 |
|
|
— |
|
|
Repayments of term loans |
(25,401 |
) |
|
(25,000 |
) |
|
(1,656,094 |
) |
|
(75,000 |
) |
|
Payment of financing costs |
(285 |
) |
|
— |
|
|
(1,580 |
) |
|
— |
|
|
Payment of deferred consideration |
(304 |
) |
|
— |
|
|
(4,500 |
) |
|
(2,500 |
) |
|
Principal payments on financed equipment |
(1,700 |
) |
|
(2,471 |
) |
|
(5,609 |
) |
|
(6,332 |
) |
|
Proceeds from exercise of stock options |
300 |
|
|
4 |
|
|
756 |
|
|
26 |
|
| Net cash used in financing
activities |
(27,390 |
) |
|
(27,467 |
) |
|
(86,722 |
) |
|
(83,806 |
) |
| Net effect of exchange rate on
cash and cash equivalents and restricted cash |
(658 |
) |
|
(331 |
) |
|
(2,146 |
) |
|
(483 |
) |
| Net increase (decrease) in cash
and cash equivalents and restricted cash |
14,337 |
|
|
(6,353 |
) |
|
22,388 |
|
|
(4,279 |
) |
| Cash and cash equivalents and
restricted cash: |
|
|
|
|
|
|
|
|
Beginning of period |
77,169 |
|
|
92,650 |
|
|
69,118 |
|
|
90,576 |
|
|
End of period |
$ |
91,506 |
|
|
$ |
86,297 |
|
|
$ |
91,506 |
|
|
$ |
86,297 |
|
| Supplemental cash flow
information: |
|
|
|
|
|
|
|
| Interest paid |
$ |
37,678 |
|
|
$ |
42,533 |
|
|
$ |
110,139 |
|
|
$ |
110,886 |
|
| Income taxes paid |
$ |
1,603 |
|
|
$ |
991 |
|
|
$ |
3,725 |
|
|
$ |
1,715 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Net (loss) income |
$ |
(6,335 |
) |
|
$ |
7,816 |
|
|
$ |
(8,236 |
) |
|
$ |
(21,900 |
) |
| Interest expense, net(1) |
37,238 |
|
|
35,752 |
|
|
111,203 |
|
|
109,398 |
|
| Income tax expense
(benefit) |
11,715 |
|
|
(4,839 |
) |
|
8,826 |
|
|
3,040 |
|
| Depreciation |
11,889 |
|
|
11,280 |
|
|
36,753 |
|
|
33,385 |
|
| Amortization of other
intangible assets |
26,177 |
|
|
21,668 |
|
|
77,890 |
|
|
64,137 |
|
| Stock-based compensation |
7,550 |
|
|
9,143 |
|
|
21,932 |
|
|
27,513 |
|
| Restructuring expenses |
197 |
|
|
(193 |
) |
|
3,021 |
|
|
2,005 |
|
| Loss from unconsolidated
entities |
— |
|
|
— |
|
|
2 |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
17,892 |
|
| Shareholder litigation
reserve |
(935 |
) |
|
— |
|
|
7,325 |
|
|
— |
|
| Adjusted EBITDA |
$ |
87,496 |
|
|
$ |
80,627 |
|
|
$ |
258,716 |
|
|
$ |
235,470 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
Cash flows from operations |
$ |
51,341 |
|
|
$ |
40,951 |
|
|
$ |
133,593 |
|
|
$ |
115,680 |
|
| Less: |
|
|
|
|
|
|
|
| Capital expenditures and financed
equipment(1) |
(10,662 |
) |
|
(13,103 |
) |
|
(27,952 |
) |
|
(33,128 |
) |
| Free cash flow |
$ |
40,679 |
|
|
$ |
27,848 |
|
|
$ |
105,641 |
|
|
$ |
82,552 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Capital expenditures during the three months ended September
30, 2018 and 2019 includes $1.7 million and $2.5 million,
respectively, of principal payments under a three year agreement
for equipment financing. Capital expenditures during the nine
months ended September 30, 2018 and 2019 includes $5.6 million and
$6.3 million, respectively, of principal payments under a three
year agreement for equipment financing. The remaining balance on
the equipment financing is $2.6 million as of September 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 and our Ecomdash inventory management and
marketplace listing solution.
- 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 September 30, |
|
Nine Months Ended September 30, |
| |
2018 |
|
2019 |
|
2018 |
|
2019 |
|
Consolidated revenue |
$ |
283,770 |
|
|
$ |
277,193 |
|
|
$ |
862,896 |
|
|
$ |
836,080 |
|
| Consolidated total
subscribers |
4,852 |
|
|
4,780 |
|
|
4,852 |
|
|
4,780 |
|
| Consolidated average
subscribers for the period |
4,885 |
|
|
4,774 |
|
|
4,951 |
|
|
4,791 |
|
| Consolidated
ARPS |
$ |
19.36 |
|
|
$ |
19.35 |
|
|
$ |
19.36 |
|
|
$ |
19.39 |
|
| |
|
|
|
|
|
|
|
| Web presence revenue |
$ |
149,871 |
|
|
$ |
143,196 |
|
|
$ |
457,603 |
|
|
$ |
433,353 |
|
| Web presence subscribers |
3,682 |
|
|
3,579 |
|
|
3,682 |
|
|
3,579 |
|
| Web presence average
subscribers for the period |
3,709 |
|
|
3,584 |
|
|
3,765 |
|
|
3,610 |
|
| Web presence
ARPS |
$ |
13.47 |
|
|
$ |
13.32 |
|
|
$ |
13.50 |
|
|
$ |
13.34 |
|
| |
|
|
|
|
|
|
|
| Email marketing revenue |
$ |
102,111 |
|
|
$ |
102,765 |
|
|
$ |
306,712 |
|
|
$ |
307,984 |
|
| Email marketing
subscribers(1) |
499 |
|
|
491 |
|
|
499 |
|
|
491 |
|
| Email marketing average
subscribers for the period |
502 |
|
|
491 |
|
|
509 |
|
|
493 |
|
| Email marketing
ARPS |
$ |
67.88 |
|
|
$ |
69.79 |
|
|
$ |
66.97 |
|
|
$ |
69.40 |
|
| |
|
|
|
|
|
|
|
| Domain revenue |
$ |
31,788 |
|
|
$ |
31,232 |
|
|
$ |
98,581 |
|
|
$ |
94,743 |
|
| Domain subscribers |
671 |
|
|
710 |
|
|
671 |
|
|
710 |
|
| Domain average subscribers for
the period |
674 |
|
|
699 |
|
|
677 |
|
|
688 |
|
| Domain
ARPS |
$ |
15.71 |
|
|
$ |
14.88 |
|
|
$ |
16.18 |
|
|
$ |
15.30 |
|
(1) Total email marketing subscriber count as of September 30,
2018 was impacted by a loss of approximately 10,500 subscribers,
which resulted from changes made to Constant Contact's account
cancellation policy to make it more consistent with the rest of our
business. These changes took place in the three months ended June
30, 2018, as previously disclosed. In addition, the total email
marketing subscriber count as of September 30, 2019 includes
approximately 1,300 subscribers added as part of our September 2019
acquisition of Ecomdash.
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 September 30, 2018 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
|
Revenue |
$ |
149,871 |
|
|
$ |
102,111 |
|
|
$ |
31,788 |
|
|
$ |
283,770 |
|
| Gross profit |
$ |
75,074 |
|
|
$ |
71,356 |
|
|
$ |
8,395 |
|
|
$ |
154,825 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(7,565 |
) |
|
$ |
6,596 |
|
|
$ |
(5,366 |
) |
|
$ |
(6,335 |
) |
| Interest expense, net(1) |
18,132 |
|
|
17,128 |
|
|
1,978 |
|
|
37,238 |
|
| Income tax expense
(benefit) |
6,136 |
|
|
4,179 |
|
|
1,400 |
|
|
11,715 |
|
| Depreciation |
8,401 |
|
|
2,538 |
|
|
950 |
|
|
11,889 |
|
| Amortization of other
intangible assets |
11,941 |
|
|
13,384 |
|
|
852 |
|
|
26,177 |
|
| Stock-based compensation |
1,569 |
|
|
4,472 |
|
|
1,509 |
|
|
7,550 |
|
| Restructuring expenses |
54 |
|
|
141 |
|
|
2 |
|
|
197 |
|
| Loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shareholder litigation
reserve |
(768 |
) |
|
— |
|
|
(167 |
) |
|
(935 |
) |
| Adjusted
EBITDA |
$ |
37,900 |
|
|
$ |
48,438 |
|
|
$ |
1,158 |
|
|
$ |
87,496 |
|
| |
|
|
|
|
|
|
|
| |
Three Months Ended September 30, 2019 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
| Revenue |
$ |
143,196 |
|
|
$ |
102,765 |
|
|
$ |
31,232 |
|
|
$ |
277,193 |
|
| Gross profit |
$ |
73,592 |
|
|
$ |
73,763 |
|
|
$ |
9,083 |
|
|
$ |
156,438 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(3,477 |
) |
|
$ |
12,546 |
|
|
$ |
(1,253 |
) |
|
$ |
7,816 |
|
| Interest expense, net(1) |
16,665 |
|
|
18,599 |
|
|
488 |
|
|
35,752 |
|
| Income tax expense
(benefit) |
(2,499 |
) |
|
(1,795 |
) |
|
(545 |
) |
|
(4,839 |
) |
| Depreciation |
8,302 |
|
|
2,114 |
|
|
864 |
|
|
11,280 |
|
| Amortization of other
intangible assets |
9,311 |
|
|
11,553 |
|
|
804 |
|
|
21,668 |
|
| Stock-based compensation |
4,751 |
|
|
3,301 |
|
|
1,091 |
|
|
9,143 |
|
| Restructuring expenses |
(37 |
) |
|
(157 |
) |
|
1 |
|
|
(193 |
) |
| Loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted
EBITDA |
$ |
33,016 |
|
|
$ |
46,161 |
|
|
$ |
1,450 |
|
|
$ |
80,627 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nine Months Ended September 30, 2018 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
|
Revenue |
$ |
457,603 |
|
|
$ |
306,712 |
|
|
$ |
98,581 |
|
|
$ |
862,896 |
|
| Gross profit |
$ |
225,149 |
|
|
$ |
214,909 |
|
|
$ |
29,241 |
|
|
$ |
469,299 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(20,549 |
) |
|
$ |
22,350 |
|
|
$ |
(10,037 |
) |
|
$ |
(8,236 |
) |
| Interest expense, net(1) |
53,503 |
|
|
50,866 |
|
|
6,834 |
|
|
111,203 |
|
| Income tax expense
(benefit) |
960 |
|
|
8,009 |
|
|
(143 |
) |
|
8,826 |
|
| Depreciation |
24,769 |
|
|
9,090 |
|
|
2,894 |
|
|
36,753 |
|
| Amortization of other
intangible assets |
35,812 |
|
|
39,716 |
|
|
2,362 |
|
|
77,890 |
|
| Stock-based compensation |
12,066 |
|
|
7,168 |
|
|
2,698 |
|
|
21,932 |
|
| Restructuring expenses |
1,654 |
|
|
723 |
|
|
644 |
|
|
3,021 |
|
| Loss of unconsolidated
entities |
2 |
|
|
— |
|
|
— |
|
|
2 |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Shareholder litigation
reserve |
4,780 |
|
|
1,500 |
|
|
1,045 |
|
|
7,325 |
|
| Adjusted
EBITDA |
$ |
112,997 |
|
|
$ |
139,422 |
|
|
$ |
6,297 |
|
|
$ |
258,716 |
|
| |
|
|
|
|
|
|
|
| |
Nine Months Ended September 30, 2019 |
| |
Web presence |
|
Email marketing |
|
Domain |
|
Total |
| Revenue |
$ |
433,353 |
|
|
$ |
307,984 |
|
|
$ |
94,743 |
|
|
$ |
836,080 |
|
| Gross profit |
$ |
219,050 |
|
|
$ |
221,399 |
|
|
$ |
11,435 |
|
|
$ |
451,884 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(20,281 |
) |
|
$ |
22,648 |
|
|
$ |
(24,267 |
) |
|
$ |
(21,900 |
) |
| Interest expense, net(1) |
50,853 |
|
|
55,103 |
|
|
3,442 |
|
|
109,398 |
|
| Income tax expense
(benefit) |
1,589 |
|
|
1,102 |
|
|
349 |
|
|
3,040 |
|
| Depreciation |
24,018 |
|
|
6,667 |
|
|
2,700 |
|
|
33,385 |
|
| Amortization of other
intangible assets |
27,600 |
|
|
34,244 |
|
|
2,293 |
|
|
64,137 |
|
| Stock-based compensation |
14,686 |
|
|
9,606 |
|
|
3,221 |
|
|
27,513 |
|
| Restructuring expenses |
752 |
|
|
1,220 |
|
|
33 |
|
|
2,005 |
|
| Loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Impairment of other long-lived
assets |
— |
|
|
— |
|
|
17,892 |
|
|
17,892 |
|
| Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Adjusted
EBITDA |
$ |
99,217 |
|
|
$ |
130,590 |
|
|
$ |
5,663 |
|
|
$ |
235,470 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issuance discounts and interest
income.
GAAP to Non-GAAP Reconciliation of Fiscal Year 2019
Guidance (as of October 31, 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 Ending December 31, 2019 |
|
Estimated net loss |
$ |
(37 |
) |
$ |
(40 |
) |
| Estimated interest expense
(net) |
|
145 |
|
|
147 |
|
| Estimated income tax expense
(benefit) |
|
7 |
|
|
9 |
|
| Estimated depreciation |
|
44 |
|
|
48 |
|
| Estimated amortization of
acquired intangible assets |
|
85 |
|
|
87 |
|
| Estimated stock-based
compensation |
|
36 |
|
|
38 |
|
| Estimated restructuring
expenses |
|
2 |
|
|
3 |
|
| Estimated (gain) loss of
unconsolidated entities |
|
— |
|
|
— |
|
| Estimated impairment of other
long-lived assets |
|
18 |
|
|
18 |
|
| Shareholder litigation
reserve |
|
— |
|
|
— |
|
| Adjusted EBITDA
guidance |
$ |
300 |
|
$ |
310 |
|
| |
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation of Fiscal Year 2019
Guidance (as of October 31, 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 Ending December 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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