Endurance International Group Holdings, Inc. (Nasdaq: EIGI), a
leading provider of cloud-based platform solutions designed to help
small and medium-sized businesses succeed online, today reported
financial results for its fourth quarter and fiscal year ended
December 31, 2019.
"Our focus on our core strategic brands and investing to
increase the value we deliver to our customers resulted in
continued financial progress in the fourth quarter," commented
Jeffrey H. Fox, president and chief executive officer at Endurance
International Group. "After adjusting for the impact of the
sale of our SinglePlatform business, we had positive net adds and
our year over year revenue continued to progress toward
inflection. The team is focused on returning the company to
growth, and we believe our revenue and subscriber trends reflect
the substantial progress we have made in 2019."
Fourth Quarter and Full Year 2019 Financial
Highlights
As previously disclosed, the company completed the sale of
SinglePlatform on December 5, 2019. For comparative purposes,
selected figures represented below do not adjust for the sale of
SinglePlatform unless noted.
- Revenue for the fourth quarter of 2019 was $277.2 million, a
decrease of 2 percent compared to $282.4 million in the fourth
quarter of 2018. Excluding the impact of SinglePlatform
for both periods, revenue was $272.4 million compared to $275.1
million in the fourth quarter of 2018, a year over year decrease of
1 percent.
- Revenue for fiscal year 2019 was $1.113 billion, a decrease of
3 percent compared to $1.145 billion in fiscal year 2018.
Excluding the impact of SinglePlatform for both periods, fiscal
2019 revenue was $1.088 billion compared to $1.117 billion in
fiscal 2018, a year over year decrease of 3 percent.
- Net income attributable to Endurance International Group
Holdings, Inc. for the fourth quarter of 2019 was $9.6 million, or
$0.07 per diluted share, compared to net income of $12.8 million,
or $0.09 per diluted share, for the fourth quarter of 2018. For
fiscal year 2019, net loss attributable to Endurance International
Group Holdings, Inc. was $12.3 million, or $(0.09) per diluted
share, compared to a net income of $4.5 million, or $0.03 per
diluted share, for fiscal year 2018.
- Adjusted EBITDA for the fourth quarter of 2019 was $78.2
million, a decrease of 1 percent compared to $79.3 million in the
fourth quarter of 2018. Adjusted EBITDA for fiscal year 2019 was
$313.6 million, a decrease of 7 percent compared to $338.1 million
in fiscal year 2018.
- Cash flow from operations for the fourth quarter of 2019 was
$46.3 million, a decrease of 5 percent compared to $49.0 million
for the fourth quarter of 2018. Cash flow from operations for
fiscal year 2019 was $162.0 million, a decrease of 11 percent
compared to $182.6 million for fiscal year 2018.
- Free cash flow, defined as cash flow from operations less
capital expenditures and financed equipment obligations, for the
fourth quarter of 2019 was $32.1 million, an increase of 36 percent
compared to $23.6 million for the fourth quarter of 2018. Free cash
flow for fiscal year 2019 was $114.7 million, a decrease of 11
percent compared to $129.2 million in fiscal year 2018.
- During fiscal year 2019, the company reduced the balance of its
term loan by $131.0 million.
Full Year and Fourth Quarter Operating
Highlights
- Total subscribers on platform at December 31, 2019 were
approximately 4.766 million, compared to approximately 4.780
million subscribers at September 30, 2019 and 4.802 million
subscribers at December 31, 2018. As a result of the
SinglePlatform disposition in December 2019, total subscriber count
was reduced by approximately 23,000 subscribers. See “Total
Subscribers” below.
- Average revenue per subscriber, or ARPS, for the fourth quarter
of 2019 was $19.34, compared to $19.50 for the fourth quarter of
2018. ARPS for fiscal year 2019 was $19.35, compared to $19.37 for
fiscal year 2018.
Fiscal 2020 Guidance
The company is providing the following guidance as of the date
of this release, February 6, 2020. For the full year
ending December 31, 2020, the company expects:
|
2019 ActualAs Reported |
2019 Adjusted forSinglePlatform Sale* |
2020 Guidance(as of February 6,
2020) |
GAAP revenue |
$1.113 billion |
$1.088 billion |
$1.085 to $1.110 billion |
Adjusted EBITDA |
$314 million |
$310 million |
approx. $300 million |
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In addition, the company expects cash flow from operations of
approximately $160 million and free cash flow of approximately $110
million.
*As previously disclosed, the company sold its SinglePlatform
business on December 5, 2019. These figures represent 2019
revenue and adjusted EBITDA as if the company had sold this
business prior to January 1, 2019. From January 1, 2019 until the
sale date, the SinglePlatform business contributed approximately
$25.4 million in GAAP revenue and $4.0 million in adjusted EBITDA
(excluding the impact of corporate cost allocations).
Adjusted EBITDA and free cash flow are non-GAAP financial
measures. The company is unable to reconcile adjusted EBITDA
guidance to GAAP without unreasonable efforts, as further discussed
below in “Non-GAAP Financial Measures.” A reconciliation of
these non-GAAP financial measures to their most comparable measure
calculated in accordance with GAAP for past periods, as well as a
reconciliation of free cash flow guidance to operating cash flow,
is provided in the financial statement tables included at the end
of this press release.
Conference Call and Webcast
InformationEndurance International Group’s fourth quarter
and full year 2019 financial results teleconference and webcast is
scheduled to begin at 8:00 a.m. EST on Thursday, February 6,
2020. To participate on the live call, analysts and investors
should dial (888) 734-0328 at least ten minutes prior to the
call. Endurance International Group will also offer a live
and archived webcast of the conference call, accessible from the
Investor Relations section of the company’s website at
http://ir.endurance.com.
Non-GAAP Financial MeasuresIn addition to our
financial information presented in accordance with GAAP, we use
adjusted EBITDA and free cash flow, which are non-GAAP financial
measures, to evaluate the operating and financial performance of
our business, identify trends affecting our business, develop
projections and make strategic business decisions. In this
press release, we are also presenting the following additional
non-GAAP financial measures for fiscal year 2019: revenue -
excluding SinglePlatform and adjusted EBITDA - excluding
SinglePlatform. A non-GAAP financial measure is a numerical
measure of a company’s operating performance, financial position or
cash flow that excludes amounts that are included in the most
directly comparable measure calculated and presented in accordance
with GAAP or includes amounts that are excluded from the most
directly comparable measure calculated and presented in accordance
with GAAP.
Our non-GAAP financial measures may not provide information that
is directly comparable to that provided by other companies in our
industry, as other companies in our industry may calculate non-GAAP
financial results differently. In addition, there are limitations
in using non-GAAP financial measures because they are not prepared
in accordance with GAAP and exclude expenses that may have a
material impact on our reported financial results. For example,
adjusted EBITDA excludes interest expense, which has been and will
continue to be for the foreseeable future a significant recurring
expense in our business. The presentation of non-GAAP financial
information is not meant to be considered in isolation from, or as
a substitute for, the most directly comparable financial measures
prepared in accordance with GAAP. We urge you to review the
additional information about adjusted EBITDA and free cash flow
shown below, including the reconciliations of these non-GAAP
financial measures to their comparable GAAP financial measures, and
not to rely on any single financial measure to evaluate our
business.
Revenue - excluding SinglePlatform is a non-GAAP financial
measure that we calculate as revenue excluding revenue contributed
by our SinglePlatform business, which we sold on December 5, 2019.
We believe that this measure helps investors evaluate and compare
our past performance excluding the impact of a non-core business
that we have sold.
Adjusted EBITDA is a non-GAAP financial measure that we
calculate as net (loss) income, excluding the impact of interest
expense (net), income tax expense (benefit), depreciation,
amortization of other intangible assets, stock-based compensation,
restructuring expenses, transaction expenses and charges, gain on
sale of business, (gain) loss of unconsolidated entities,
impairment of goodwill and other long-lived assets, SEC
investigations reserve, and shareholder litigation reserve. We view
adjusted EBITDA as a performance measure and believe it helps
investors evaluate and compare our core operating performance from
period to period.
Adjusted EBITDA - excluding SinglePlatform is a non-GAAP
financial measure that we calculate as adjusted EBITDA less
adjusted EBITDA contributed by our SinglePlatform business, which
we sold on December 5, 2019. Adjusted EBITDA contributed by our
SinglePlatform business excludes the impact of corporate costs that
we had allocated to SinglePlatform, since we will continue to incur
these costs following the sale. We believe that this measure helps
investors evaluate and compare our past performance excluding the
impact of a non-core business that we have sold.
Free Cash Flow, or FCF, is a non-GAAP financial measure that we
calculate as cash flow from operations less capital expenditures
and financed equipment. We believe that FCF provides investors with
an indicator of our ability to generate positive cash flows after
meeting our obligations with regard to capital expenditures
(including financed equipment).
Fiscal 2020 guidance included in this press release includes
forward-looking guidance for adjusted EBITDA and FCF. A
reconciliation of FCF guidance to cash flow from operations is
included below. We are unable to reconcile our adjusted EBITDA
guidance to net (loss) income because certain information necessary
for this reconciliation is not available without unreasonable
efforts since it is difficult to predict and/or dependent on future
events that are outside of our control. In particular, we are
unable to provide reasonable predictions of the following
reconciling items: income tax expense (benefit), transaction
expenses and charges, and impairment of goodwill and other
long-lived assets. These items are difficult to predict with a
reasonable degree of accuracy because of unanticipated changes in
our GAAP effective income tax rate, a primary contributor to net
income; uncertain or unanticipated acquisition costs; and
unanticipated charges related to asset impairments. The impact of
these items, in the aggregate, could be significant. With
respect to the other reconciling items, as of the date of this
press release, we expect the following for 2020 (all amounts are
estimated, approximate, and subject to change): interest expense
(net) of $130 million, depreciation expense of $46 million,
amortization expense for other intangible assets of $72 million,
and stock-based compensation expense of $30 million. At this
time, we do not expect expenses in 2020 for the remaining
reconciling items. These forward-looking estimates of reconciling
items may different materially from our actual results and should
not be relied upon as statements of fact.
Key Operating MetricsTotal Subscribers - We
define total subscribers as the approximate number of subscribers
that, as of the end of a period, are identified as subscribing
directly to our products on a paid basis, excluding accounts that
access our solutions via resellers or that purchase only domain
names from us. Subscribers of more than one brand, and subscribers
with more than one distinct billing relationship or subscription
with us, are counted as separate subscribers. Total subscribers for
a period reflects adjustments to add or subtract subscribers as we
integrate acquisitions and/or are otherwise able to identify
subscribers that meet, or do not meet, this definition of total
subscribers. There were no adjustments in the fourth quarter of
2019.
Average Revenue Per Subscriber (ARPS) - We calculate ARPS as the
amount of revenue we recognize in a period, including marketing
development funds and other revenue not received from subscribers,
divided by the average of the number of total subscribers at the
beginning of the period and at the end of the period, which we
refer to as average subscribers for the period, divided by the
number of months in the period. See definition of “Total
Subscribers” above. ARPS does not represent an exact measure
of the average amount a subscriber spends with us each month, since
our calculation of ARPS is impacted by revenues generated by
non-subscribers.
Forward-Looking 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 our
financial guidance for fiscal year 2020 and statements reflecting
the expectation that we will return to year over year revenue
growth in future periods. These forward-looking statements include,
but are not limited to, plans, objectives, expectations and
intentions and other statements contained in this press release
that are not historical facts, and statements identified by words
such as “expects,” “believes,” “estimates,” “may,” “continue,”
“positions,” “confident,” and variations of such words or words of
similar meaning and the use of future dates. These forward-looking
statements reflect our current views about our plans, intentions,
expectations, strategies and prospects, which are based on the
information currently available to us and on assumptions we have
made. Although we believe that our plans, intentions, expectations,
strategies and prospects as reflected in or suggested by those
forward-looking statements are reasonable, we can give no assurance
that these plans, intentions, expectations or strategies will be
attained or achieved. Furthermore, actual results may differ
materially from those described in the forward-looking statements
and will be affected by a variety of risks and factors that are
beyond our control including, without limitation: the possibility
that our financial guidance may differ from expectations; the
possibility that our planned investment initiatives will not result
in the anticipated benefits to our business; the possibility that
we will continue to experience decreases in our subscriber base; an
adverse impact on our business from litigation or regulatory
proceedings or commercial disputes; an adverse impact on our
business from our substantial indebtedness and the cost of
servicing our debt; the rate of growth of the Small and Medium
Business (“SMB”) market for our solutions; our inability to grow
our subscriber base, increase sales to our existing subscribers, or
retain our existing subscribers; system or Internet failures; our
inability to maintain or improve our competitive position or market
share; and other risks and uncertainties discussed in our filings
with the SEC, including those set forth under the caption “Risk
Factors” in our Annual Report on Form 10-K for the period ended
December 31, 2018 filed with the SEC on February 21, 2019 and other
reports we file with the SEC.
We assume no obligation to update any forward-looking statements
contained in this document as a result of new information, future
events or otherwise.
About Endurance International 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, Domain.com and SiteBuilder, among others.
Headquartered in Burlington, Massachusetts, Endurance employs over
3,700 people across the United States, Brazil, India and the
Netherlands. For more information, visit: www.endurance.com.
Endurance International Group and the compass logo are
trademarks of The Endurance International Group, Inc.
Constant Contact, the Constant Contact logo and other brand names
of Endurance International Group are trademarks of The Endurance
International Group, Inc. or its subsidiaries.
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Investor Contact:Angela
WhiteEndurance International Group(781)
852-3450ir@endurance.com |
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Press Contact:Kristen
AndrewsEndurance International Group(781)
418-6716press@endurance.com |
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Endurance
International Group Holdings, Inc.Consolidated
Balance Sheets(unaudited)(in thousands, except
share and per share amounts) |
|
|
|
|
|
December 31,2018 |
|
December 31,2019 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
88,644 |
|
|
$ |
111,265 |
|
Restricted cash |
1,932 |
|
|
1,732 |
|
Accounts receivable |
12,205 |
|
|
10,224 |
|
Prepaid domain name registry fees |
56,779 |
|
|
55,237 |
|
Prepaid commissions |
41,458 |
|
|
38,435 |
|
Prepaid and refundable taxes |
7,235 |
|
|
6,810 |
|
Prepaid expenses and other current assets |
27,855 |
|
|
23,883 |
|
Total current assets |
236,108 |
|
|
247,586 |
|
Property and equipment—net |
92,275 |
|
|
85,925 |
|
Operating lease right-of-use assets |
— |
|
|
90,519 |
|
Goodwill |
1,849,065 |
|
|
1,835,310 |
|
Other intangible assets—net |
352,516 |
|
|
245,002 |
|
Deferred financing costs—net |
2,656 |
|
|
1,778 |
|
Investments |
15,000 |
|
|
15,000 |
|
Prepaid domain name registry fees, net of current portion |
11,207 |
|
|
11,107 |
|
Prepaid commissions, net of current portion |
42,472 |
|
|
48,780 |
|
Deferred tax asset |
— |
|
|
64 |
|
Other assets |
5,208 |
|
|
3,015 |
|
Total assets |
$ |
2,606,507 |
|
|
$ |
2,584,086 |
|
Liabilities and stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
12,449 |
|
|
10,054 |
|
Accrued expenses |
79,279 |
|
|
64,560 |
|
Accrued taxes |
2,498 |
|
|
251 |
|
Accrued interest |
25,259 |
|
|
23,434 |
|
Deferred revenue |
371,758 |
|
|
369,475 |
|
Operating lease liabilities—short term |
— |
|
|
21,193 |
|
Current portion of notes payable |
31,606 |
|
|
31,606 |
|
Current portion of financed equipment |
8,379 |
|
|
790 |
|
Deferred consideration—short term |
2,425 |
|
|
2,201 |
|
Other current liabilities |
3,147 |
|
|
2,165 |
|
Total current liabilities |
536,800 |
|
|
525,729 |
|
Long-term deferred revenue |
96,140 |
|
|
99,652 |
|
Operating lease liabilities—long term |
— |
|
|
78,151 |
|
Notes payable—long term, net of original issue discounts of
$21,349 and $16,859, and deferred financing costs of $31,992 and
$25,690, respectively |
1,770,055 |
|
|
1,649,867 |
|
Deferred tax liability |
16,457 |
|
|
27,097 |
|
Deferred consideration—long term |
1,364 |
|
|
— |
|
Other liabilities |
11,237 |
|
|
6,636 |
|
Total liabilities |
2,432,053 |
|
|
2,387,132 |
|
Stockholders’ equity: |
|
|
|
Preferred Stock—par value $0.0001; 5,000,000 shares authorized; no
shares issued or outstanding |
— |
|
|
— |
|
Common Stock—par value $0.0001; 500,000,000 shares authorized;
143,444,515 and 146,259,868 shares issued at December 31, 2018
and December 31, 2019, respectively; 143,444,178 and
146,259,868 outstanding at December 31, 2018 and
December 31, 2019, respectively |
14 |
|
|
15 |
|
Additional paid-in capital |
961,235 |
|
|
996,958 |
|
Accumulated other comprehensive loss |
(3,211 |
) |
|
(4,088 |
) |
Accumulated deficit |
(783,584 |
) |
|
(795,931 |
) |
Total stockholders’ equity |
174,454 |
|
|
196,954 |
|
Total liabilities and stockholders’ equity |
$ |
2,606,507 |
|
|
$ |
2,584,086 |
|
|
|
|
|
|
|
|
|
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Endurance
International Group Holdings, Inc.Consolidated
Statements of Operations and Comprehensive Income
(Loss)(unaudited)(in thousands,
except share and per share amounts) |
|
|
|
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|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
Revenue |
$ |
282,395 |
|
|
$ |
277,198 |
|
|
$ |
1,145,291 |
|
|
$ |
1,113,278 |
|
Cost of revenue (including
impairment of $7,315 and $25,207, respectively, for the three and
twelve months ended December 31, 2019) |
127,140 |
|
|
126,100 |
|
|
520,737 |
|
|
510,296 |
|
Gross profit |
155,255 |
|
|
151,098 |
|
|
624,554 |
|
|
602,982 |
|
Operating expense: |
|
|
|
|
|
|
|
Sales and marketing |
67,691 |
|
|
66,798 |
|
|
265,424 |
|
|
258,019 |
|
Engineering and development |
23,421 |
|
|
29,078 |
|
|
87,980 |
|
|
106,377 |
|
General and administrative |
28,992 |
|
|
25,141 |
|
|
124,204 |
|
|
117,967 |
|
Gain on sale of business |
— |
|
|
(40,700 |
) |
|
— |
|
|
(40,700 |
) |
Impairment of goodwill |
— |
|
|
12,333 |
|
|
— |
|
|
12,333 |
|
Total operating expense |
120,104 |
|
|
92,650 |
|
|
477,608 |
|
|
453,996 |
|
Income from operations |
35,151 |
|
|
58,448 |
|
|
146,946 |
|
|
148,986 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest income |
369 |
|
|
312 |
|
|
1,089 |
|
|
1,222 |
|
Interest expense |
(37,557 |
) |
|
(34,368 |
) |
|
(149,480 |
) |
|
(144,676 |
) |
Total other (expense)
income—net |
(37,188 |
) |
|
(34,056 |
) |
|
(148,391 |
) |
|
(143,454 |
) |
(Loss) income before income
taxes and equity earnings of unconsolidated entities |
(2,037 |
) |
|
24,392 |
|
|
(1,445 |
) |
|
5,532 |
|
Income tax (benefit)
expense |
(15,072 |
) |
|
14,839 |
|
|
(6,246 |
) |
|
17,879 |
|
Income (loss) before equity
earnings of unconsolidated entities |
13,035 |
|
|
9,553 |
|
|
4,801 |
|
|
(12,347 |
) |
Equity loss of unconsolidated
entities, net of tax |
265 |
|
|
— |
|
|
267 |
|
|
— |
|
Net income (loss) |
$ |
12,770 |
|
|
$ |
9,553 |
|
|
$ |
4,534 |
|
|
$ |
(12,347 |
) |
Net income (loss) attributable
to Endurance International Group Holdings, Inc. |
$ |
12,770 |
|
|
$ |
9,553 |
|
|
$ |
4,534 |
|
|
$ |
(12,347 |
) |
Comprehensive income
(loss): |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
256 |
|
|
456 |
|
|
(2,233 |
) |
|
(598 |
) |
Unrealized (loss) gain on cash flow hedge, net of taxes of ($763)
and ($98) for the three months ended December 31, 2018 and 2019,
respectively and ($137) and $102 for the twelve months ended
December 31, 2018 and 2019, respectively |
(2,433 |
) |
|
332 |
|
|
(437 |
) |
|
(279 |
) |
Total comprehensive income
(loss) |
$ |
10,593 |
|
|
$ |
10,341 |
|
|
$ |
1,864 |
|
|
$ |
(13,224 |
) |
Net income (loss) per share
attributable to Endurance International Group Holdings,
Inc.—basic |
$ |
0.09 |
|
|
$ |
0.07 |
|
|
$ |
0.03 |
|
|
$ |
(0.09 |
) |
Net income (loss) per share
attributable to Endurance International Group Holdings,
Inc.—diluted |
$ |
0.09 |
|
|
$ |
0.07 |
|
|
$ |
0.03 |
|
|
$ |
(0.09 |
) |
Weighted-average number of
common shares used in computing net income (loss) per share
attributable to Endurance International Group Holdings,
Inc.—basic |
143,415,944 |
|
|
146,231,482 |
|
|
142,316,993 |
|
|
145,259,691 |
|
Weighted-average number of
common shares used in computing net income (loss) per share
attributable to Endurance International Group Holdings,
Inc.—diluted |
145,228,986 |
|
|
146,426,817 |
|
|
145,669,760 |
|
|
145,259,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endurance
International Group Holdings, Inc.Consolidated
Statements of Cash
Flows(unaudited)(in
thousands) |
|
|
|
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
12,770 |
|
|
$ |
9,553 |
|
|
$ |
4,534 |
|
|
$ |
(12,347 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation of property and equipment |
11,454 |
|
|
11,566 |
|
|
48,207 |
|
|
44,951 |
|
Amortization of other intangible assets from acquisitions |
25,258 |
|
|
21,046 |
|
|
103,148 |
|
|
85,183 |
|
Amortization of deferred financing costs |
1,746 |
|
|
1,848 |
|
|
6,454 |
|
|
7,179 |
|
Amortization of net present value of deferred consideration |
62 |
|
|
20 |
|
|
373 |
|
|
163 |
|
Amortization of original issuance discount |
1,096 |
|
|
1,154 |
|
|
4,305 |
|
|
4,490 |
|
Impairment of long-lived assets |
— |
|
|
7,315 |
|
|
— |
|
|
25,207 |
|
Impairment of goodwill |
— |
|
|
12,333 |
|
|
— |
|
|
12,333 |
|
Stock-based compensation |
7,132 |
|
|
8,179 |
|
|
29,064 |
|
|
35,692 |
|
Deferred tax (benefit) expense |
(19,277 |
) |
|
8,727 |
|
|
(10,438 |
) |
|
10,669 |
|
Gain on sale of business |
— |
|
|
(40,700 |
) |
|
— |
|
|
(40,700 |
) |
Loss on sale of assets |
7 |
|
|
35 |
|
|
198 |
|
|
163 |
|
Loss of unconsolidated entities |
265 |
|
|
— |
|
|
267 |
|
|
— |
|
Financing costs expensed |
— |
|
|
— |
|
|
1,228 |
|
|
— |
|
Loss on early extinguishment of debt |
— |
|
|
— |
|
|
331 |
|
|
— |
|
Changes in operating assets and liabilities, net of acquisitions
and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
1,929 |
|
|
1,951 |
|
|
3,616 |
|
|
1,985 |
|
Prepaid and refundable taxes |
550 |
|
|
6,403 |
|
|
(2,896 |
) |
|
495 |
|
Prepaid expenses and other current assets |
(7,267 |
) |
|
(1,251 |
) |
|
(4,564 |
) |
|
3,857 |
|
Leases right-of-use asset, net |
— |
|
|
261 |
|
|
— |
|
|
656 |
|
Accounts payable and accrued expenses |
23,051 |
|
|
1,927 |
|
|
5,040 |
|
|
(21,565 |
) |
Deferred revenue |
(9,817 |
) |
|
(4,074 |
) |
|
(6,315 |
) |
|
3,562 |
|
Net cash provided by operating activities |
48,959 |
|
|
46,293 |
|
|
182,552 |
|
|
161,973 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Businesses acquired in purchase transaction, net of cash
acquired |
— |
|
|
— |
|
|
— |
|
|
(8,875 |
) |
Purchases of property and equipment |
(23,537 |
) |
|
(12,330 |
) |
|
(45,880 |
) |
|
(39,126 |
) |
Proceeds from sale of assets |
— |
|
|
51,000 |
|
|
6 |
|
|
51,001 |
|
Purchases of intangible assets |
(8 |
) |
|
— |
|
|
(8 |
) |
|
— |
|
Net cash (used in) provided by investing activities |
(23,545 |
) |
|
38,670 |
|
|
(45,882 |
) |
|
3,000 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of term loan |
— |
|
|
— |
|
|
1,580,305 |
|
|
— |
|
Repayment of term loan |
(25,000 |
) |
|
(55,980 |
) |
|
(1,681,094 |
) |
|
(130,980 |
) |
Payment of financing costs |
— |
|
|
— |
|
|
(1,580 |
) |
|
— |
|
Payment of deferred consideration |
— |
|
|
— |
|
|
(4,500 |
) |
|
(2,500 |
) |
Principal payments on financed equipment |
(1,830 |
) |
|
(1,857 |
) |
|
(7,439 |
) |
|
(8,189 |
) |
Proceeds from exercise of stock options |
131 |
|
|
5 |
|
|
887 |
|
|
31 |
|
Net cash used in financing activities |
(26,699 |
) |
|
(57,832 |
) |
|
(113,421 |
) |
|
(141,638 |
) |
Net effect of exchange rate on cash and cash equivalents and
restricted cash |
355 |
|
|
(431 |
) |
|
(1,791 |
) |
|
(914 |
) |
Net (decrease) increase in cash and cash equivalents and restricted
cash |
(930 |
) |
|
26,700 |
|
|
21,458 |
|
|
22,421 |
|
Cash and cash equivalents and restricted cash: |
|
|
|
|
|
|
|
Beginning of period |
91,506 |
|
|
86,297 |
|
|
69,118 |
|
|
90,576 |
|
End of period |
$ |
90,576 |
|
|
$ |
112,997 |
|
|
$ |
90,576 |
|
|
$ |
112,997 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Interest paid |
$ |
24,006 |
|
|
$ |
21,920 |
|
|
$ |
134,145 |
|
|
$ |
132,805 |
|
Income taxes paid |
$ |
416 |
|
|
$ |
3,014 |
|
|
$ |
4,141 |
|
|
$ |
4,728 |
|
Supplemental disclosure of non-cash financing activities: |
|
|
|
|
|
|
|
Assets acquired under equipment financing |
$ |
1,179 |
|
|
$ |
— |
|
|
$ |
1,179 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP reconciliation - Adjusted
EBITDA
The following table presents a reconciliation of net income
(loss) calculated in accordance with GAAP to adjusted EBITDA:
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
|
(in thousands) |
|
Net income (loss) |
$ |
12,770 |
|
|
$ |
9,553 |
|
|
$ |
4,534 |
|
|
$ |
(12,347 |
) |
|
Interest
expense–net(1) |
37,188 |
|
|
34,056 |
|
|
148,391 |
|
|
143,454 |
|
|
Income tax (benefit) expense |
(15,072 |
) |
|
14,839 |
|
|
(6,246 |
) |
|
17,879 |
|
|
Depreciation |
11,454 |
|
|
11,566 |
|
|
48,207 |
|
|
44,951 |
|
|
Amortization of other intangible
assets |
25,258 |
|
|
21,046 |
|
|
103,148 |
|
|
85,183 |
|
|
Stock-based compensation |
7,132 |
|
|
8,179 |
|
|
29,064 |
|
|
35,692 |
|
|
Restructuring expenses |
347 |
|
|
(13 |
) |
|
3,368 |
|
|
1,992 |
|
|
Gain on sale of business |
— |
|
|
(40,700 |
) |
|
— |
|
|
(40,700 |
) |
|
Loss of unconsolidated
entities |
265 |
|
|
— |
|
|
267 |
|
|
— |
|
|
Impairment of goodwill and
other long-lived assets |
— |
|
|
19,648 |
|
|
— |
|
|
37,540 |
|
|
Shareholder litigation
reserve |
— |
|
|
— |
|
|
7,325 |
|
|
— |
|
|
Adjusted
EBITDA |
$ |
79,342 |
|
|
$ |
78,174 |
|
|
$ |
338,058 |
|
|
$ |
313,644 |
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Interest expense includes impact of amortization of deferred
financing costs, original issue discounts and interest income.(*)
Excluding SinglePlatform, which contributed approximately $4.0
million in adjusted EBITDA (excluding the impact of corporate cost
allocations) in 2019, adjusted EBITDA would have been approximately
$309.6 million.
GAAP to Non-GAAP reconciliation – Free Cash
Flow
The following table reflects the reconciliation of cash flow
from operations to free cash flow (“FCF”) (all data in
thousands):
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
|
|
|
|
|
|
|
Cash flow from operations |
$ |
48,959 |
|
|
$ |
46,293 |
|
|
$ |
182,552 |
|
|
$ |
161,973 |
|
Less: |
|
|
|
|
|
|
|
Capital expenditures and financed
equipment obligations(1) |
(25,367 |
) |
|
(14,187 |
) |
|
(53,319 |
) |
|
(47,315 |
) |
|
|
|
|
|
|
|
|
Free cash
flow |
$ |
23,592 |
|
|
$ |
32,106 |
|
|
$ |
129,233 |
|
|
$ |
114,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Capital expenditures during the three and twelve months
ended December 31, 2018 includes $1.8 million and $7.4 million
of principal payments under a three year agreement for equipment
financing. Capital expenditures during the three and twelve months
ended December 31, 2019 includes $1.9 million and $8.2 million
of principal payments under a two year agreement for equipment
financing. The remaining balance on the equipment financing is $0.8
million as of December 31, 2019.
Average Revenue Per Subscriber - Calculation and Segment
Detail
We present our financial results in the following three
segments:
- Web presence. The web presence segment
consists primarily of our web hosting brands, including Bluehost
and HostGator. This segment also includes related products such as
domain names, website security, website design tools and services,
and e-commerce products.
- Email marketing. The email marketing segment
consists of Constant Contact email marketing tools and related
products. This segment also generates revenue from sales of our
Constant Contact branded website builder tool and our Ecomdash
inventory management and marketplace listing solution. For most of
2019, the email marketing segment also included the SinglePlatform
digital storefront business, which we sold on December 5,
2019.
- Domain. The domain segment consists of
domain-focused brands such as Domain.com, ResellerClub and
LogicBoxes as well as certain web hosting brands that are under
common management with our domain-focused brands. This segment
sells domain names and domain management services to resellers and
end users, as well as premium domain names, and also generates
advertising revenue from domain name parking. It also resells
domain names and domain management services to our web presence
segment.
The following table presents the calculation of ARPS, on a
consolidated basis and by segment:
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
(in thousands, except ARPS) |
Consolidated revenue |
$ |
282,395 |
|
|
$ |
277,198 |
|
|
$ |
1,145,291 |
|
|
$ |
1,113,278 |
|
Consolidated total
subscribers |
4,802 |
|
|
4,766 |
|
|
4,802 |
|
|
4,766 |
|
Consolidated average
subscribers |
4,827 |
|
|
4,778 |
|
|
4,927 |
|
|
4,793 |
|
Consolidated
ARPS |
$ |
19.50 |
|
|
$ |
19.34 |
|
|
$ |
19.37 |
|
|
$ |
19.35 |
|
|
|
|
|
|
|
|
|
Web presence revenue |
$ |
147,712 |
|
|
$ |
143,351 |
|
|
$ |
605,315 |
|
|
$ |
576,704 |
|
Web presence subscribers |
3,639 |
|
|
3,567 |
|
|
3,639 |
|
|
3,567 |
|
Web presence average
subscribers |
3,661 |
|
|
3,573 |
|
|
3,744 |
|
|
3,603 |
|
Web presence
ARPS |
$ |
13.45 |
|
|
$ |
13.37 |
|
|
$ |
13.47 |
|
|
$ |
13.34 |
|
|
|
|
|
|
|
|
|
Email marketing revenue |
$ |
103,340 |
|
|
$ |
102,688 |
|
|
$ |
410,052 |
|
|
$ |
410,672 |
|
Email marketing subscribers
(1) |
497 |
|
|
468 |
|
|
497 |
|
|
468 |
|
Email marketing average
subscribers |
498 |
|
|
484 |
|
|
508 |
|
|
492 |
|
Email marketing
ARPS |
$ |
69.22 |
|
|
$ |
70.70 |
|
|
$ |
67.28 |
|
|
$ |
69.58 |
|
|
|
|
|
|
|
|
|
Domain revenue |
$ |
31,343 |
|
|
$ |
31,159 |
|
|
$ |
129,924 |
|
|
$ |
125,902 |
|
Domain subscribers |
666 |
|
|
731 |
|
|
666 |
|
|
731 |
|
Domain average
subscribers |
668 |
|
|
721 |
|
|
675 |
|
|
698 |
|
Domain
ARPS |
$ |
15.63 |
|
|
$ |
14.42 |
|
|
$ |
16.05 |
|
|
$ |
15.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The total email marketing subscriber count as of December
31, 2019 includes approximately 1,300 subscribers added as part of
the September 2019 acquisition of Ecomdash and reflects a decrease
of approximately 23,000 subscribers due to the December 2019 sale
of the SinglePlatform business.
The following table presents a reconciliation by segment of net
(loss) income calculated in accordance with GAAP to adjusted
EBITDA:
|
Three Months Ended December 31, 2019 |
|
Web presence |
|
Emailmarketing |
|
Domain |
|
Total |
|
(in thousands) |
Revenue(1) |
$ |
143,351 |
|
|
$ |
102,688 |
|
|
$ |
31,159 |
|
|
$ |
277,198 |
|
Gross profit |
74,629 |
|
|
73,669 |
|
|
2,800 |
|
|
151,098 |
|
|
|
|
|
|
Net (loss) income |
$ |
(24,605 |
) |
|
$ |
44,764 |
|
|
$ |
(10,606 |
) |
|
$ |
9,553 |
|
Interest expense, net(2) |
15,926 |
|
|
17,723 |
|
|
407 |
|
|
34,056 |
|
Income tax expense |
7,672 |
|
|
5,498 |
|
|
1,669 |
|
|
14,839 |
|
Depreciation |
8,326 |
|
|
2,360 |
|
|
880 |
|
|
11,566 |
|
Amortization of other
intangible assets |
9,306 |
|
|
11,632 |
|
|
108 |
|
|
21,046 |
|
Stock-based compensation |
4,400 |
|
|
2,701 |
|
|
1,078 |
|
|
8,179 |
|
Restructuring expenses |
— |
|
|
(13 |
) |
|
— |
|
|
(13 |
) |
Gain on sale of business |
— |
|
|
(40,700 |
) |
|
— |
|
|
(40,700 |
) |
(Gain) loss of unconsolidated
entities |
— |
|
|
— |
|
|
|
— |
|
Impairment of goodwill and
other long-lived assets |
12,333 |
|
|
— |
|
|
7,315 |
|
|
19,648 |
|
Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted
EBITDA |
$ |
33,358 |
|
|
$ |
43,965 |
|
|
$ |
851 |
|
|
$ |
78,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2019 |
|
Web presence |
|
Emailmarketing |
|
Domain |
|
Total |
|
(in thousands) |
Revenue(1) |
$ |
576,704 |
|
|
$ |
410,672 |
|
|
$ |
125,902 |
|
|
$ |
1,113,278 |
|
Gross profit |
293,679 |
|
|
295,068 |
|
|
14,235 |
|
|
602,982 |
|
|
|
|
|
|
Net (loss) income |
$ |
(44,886 |
) |
|
$ |
67,412 |
|
|
$ |
(34,873 |
) |
|
$ |
(12,347 |
) |
Interest expense, net(2) |
66,779 |
|
|
72,826 |
|
|
3,849 |
|
|
143,454 |
|
Income tax expense |
9,261 |
|
|
6,600 |
|
|
2,018 |
|
|
17,879 |
|
Depreciation |
32,344 |
|
|
9,027 |
|
|
3,580 |
|
|
44,951 |
|
Amortization of other
intangible assets |
36,906 |
|
|
45,876 |
|
|
2,401 |
|
|
85,183 |
|
Stock-based compensation |
19,086 |
|
|
12,307 |
|
|
4,299 |
|
|
35,692 |
|
Restructuring expenses |
752 |
|
|
1,207 |
|
|
33 |
|
|
1,992 |
|
Gain on sale of business |
— |
|
|
(40,700 |
) |
|
— |
|
|
(40,700 |
) |
(Gain) loss of unconsolidated
entities |
— |
|
|
— |
|
|
— |
|
|
— |
|
Impairment of goodwill and
other long-lived assets |
12,333 |
|
|
— |
|
|
25,207 |
|
|
37,540 |
|
Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted
EBITDA |
$ |
132,575 |
|
|
$ |
174,555 |
|
|
$ |
6,514 |
|
|
$ |
313,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2018 |
|
Web presence |
|
Emailmarketing |
|
Domain |
|
Total |
|
(in thousands) |
Revenue(1) |
$ |
147,712 |
|
|
$ |
103,340 |
|
|
$ |
31,343 |
|
|
$ |
282,395 |
|
Gross profit |
72,441 |
|
|
73,114 |
|
|
9,700 |
|
|
155,255 |
|
|
|
|
|
|
Net (loss) income |
$ |
(1,985 |
) |
|
$ |
16,278 |
|
|
$ |
(1,523 |
) |
|
$ |
12,770 |
|
Interest expense, net(2) |
17,453 |
|
|
17,451 |
|
|
2,284 |
|
|
37,188 |
|
Income tax benefit |
(5,921 |
) |
|
(7,894 |
) |
|
(1,257 |
) |
|
(15,072 |
) |
Depreciation |
8,146 |
|
|
2,407 |
|
|
901 |
|
|
11,454 |
|
Amortization of other
intangible assets |
11,208 |
|
|
13,384 |
|
|
666 |
|
|
25,258 |
|
Stock-based compensation |
3,934 |
|
|
2,470 |
|
|
728 |
|
|
7,132 |
|
Restructuring expenses |
481 |
|
|
(134 |
) |
|
— |
|
|
347 |
|
Loss of unconsolidated
entities |
265 |
|
|
— |
|
|
— |
|
|
265 |
|
Impairment of goodwill and
other long-lived assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
Shareholder litigation
reserve |
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted
EBITDA |
$ |
33,581 |
|
|
$ |
43,962 |
|
|
$ |
1,799 |
|
|
$ |
79,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31, 2018 |
|
Web presence |
|
Emailmarketing |
|
Domain |
|
Total |
|
(in thousands) |
Revenue(1) |
$ |
605,315 |
|
|
$ |
410,052 |
|
|
$ |
129,924 |
|
|
$ |
1,145,291 |
|
Gross profit |
297,590 |
|
|
288,023 |
|
|
38,941 |
|
|
624,554 |
|
|
|
|
|
|
Net (loss) income |
$ |
(22,534 |
) |
|
$ |
38,628 |
|
|
$ |
(11,560 |
) |
|
$ |
4,534 |
|
Interest expense, net(2) |
70,956 |
|
|
68,317 |
|
|
9,118 |
|
|
148,391 |
|
Income tax (benefit)
expense |
(4,961 |
) |
|
115 |
|
|
(1,400 |
) |
|
(6,246 |
) |
Depreciation |
32,915 |
|
|
11,497 |
|
|
3,795 |
|
|
48,207 |
|
Amortization of other
intangible assets |
47,020 |
|
|
53,100 |
|
|
3,028 |
|
|
103,148 |
|
Stock-based compensation |
16,000 |
|
|
9,638 |
|
|
3,426 |
|
|
29,064 |
|
Restructuring expenses |
2,135 |
|
|
589 |
|
|
644 |
|
|
3,368 |
|
Loss of unconsolidated
entities |
267 |
|
|
— |
|
|
— |
|
|
267 |
|
Impairment of goodwill and
other long-lived assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
Shareholder litigation
reserve |
4,780 |
|
|
1,500 |
|
|
1,045 |
|
|
7,325 |
|
Adjusted
EBITDA |
$ |
146,578 |
|
|
$ |
183,384 |
|
|
$ |
8,096 |
|
|
$ |
338,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Revenue excludes intercompany transactions between the
domain and web presence segments relating to domain sales and
services of $2.4 million and $2.3 million for the three months
ended December 31, 2018 and 2019, respectively, and $10.0
million and $9.8 million for the twelve months ended
December 31, 2018 and 2019, respectively.(2) Interest expense
includes impact of amortization of deferred financing costs,
original issuance discounts and interest income.
GAAP to Non-GAAP Reconciliation of Fiscal Year 2020
Guidance (as of February 6, 2020) - Free Cash
Flow
The following table reflects the reconciliation of fiscal year
2020 estimated cash flow from operations calculated in accordance
with GAAP to fiscal year 2020 guidance for free cash flow. All
figures shown are approximate.
($ in millions) |
Twelve Months EndingDecember 31, 2020 |
Estimated cash flow from operations |
$ |
160 |
|
Estimated capital expenditures
and financed equipment obligations |
(50 |
) |
Free cash flow
guidance |
$ |
110 |
|
|
|
|
|
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