Fiscal Year 2016
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, 2016.
“Our fourth quarter and fiscal year results
exceeded our revised guidance for revenue, adjusted EBITDA and free
cash flow, the result of continued strong performance from Constant
Contact and a more disciplined approach to our marketing
investments,” commented Hari Ravichandran, chief executive officer
and founder of Endurance International Group. “For 2017, we
plan to focus on driving improved performance from our key hosting
brands, including Bluehost and Host Gator, and building on the
solid results we have seen with Constant Contact. We also
plan to invest in building brand awareness for these and other key
brands, as well as fund operational and infrastructure improvements
to enhance the customer product and service experience. We believe
this will position us to achieve long term profitable growth and
increased free cash flow.”
Full Year and Fourth Quarter 2016 Financial
Highlights
- For fiscal year 2016, revenue was $1.111 billion, an increase
of 50 percent compared to $741.3 million in fiscal 2015.
Revenue for the fourth quarter of 2016 was $292.1 million, an
increase of 51 percent compared to $193.0 million in the fourth
quarter of 2015. Revenue for the fiscal year and fourth
quarter includes a contribution of $340.9 million and $101.8
million, respectively, from acquisitions, primarily Constant
Contact.
- For fiscal year 2016, net loss was $81.2 million compared to a
net loss of $25.8 million for fiscal 2015. Net loss for the
fourth quarter of 2016 was $32.1 million compared to a net loss of
$9.2 million for the fourth quarter of 2015.
- For fiscal year 2016, net loss attributable to Endurance
International Group Holdings, Inc. was $72.8 million, or $(0.55)
per diluted share, compared to a net loss of $25.8 million, or
$(0.20) per diluted share, for fiscal 2015. Net loss
attributable to Endurance International Group Holdings, Inc. for
the fourth quarter of 2016 was $34.9 million, or $(0.26) per
diluted share, compared to a net loss of $9.2 million, or $(0.07)
per diluted share, for the fourth quarter of 2015.
- Adjusted EBITDA for fiscal year 2016 was $288.4 million, an
increase of 32 percent compared to $219.2 million in fiscal
2015. Adjusted EBITDA for the fourth quarter of 2016 was
$87.0 million, an increase of 39 percent compared to $62.5 million
in the fourth quarter of 2015.
- Cash flow from operations for fiscal year 2016 was $155.0
million, a decrease of 13 percent compared to $177.2 million for
fiscal 2015. Cash flow from operations for the fourth quarter
of 2016 was $53.2 million, an increase of 23 percent compared to
$43.4 million for the fourth quarter of 2015.
- Free cash flow, defined as cash flow from operations less
capital expenditures and capital lease obligations, for fiscal year
2016 was $111.8 million, a decrease of 21 percent compared to
$141.2 million in fiscal 2015. Free cash flow for the fourth
quarter of 2016 was $43.7 million, an increase of 31 percent
compared to $33.4 million for the fourth quarter of
2015.
- Cash flow from operations and free cash flow in fiscal year
2016 were both negatively impacted by an increase of $61.7 million
in interest payments and approximately $60.0 million of
transaction, restructuring and integration costs, primarily related
to the acquisition of Constant Contact.
Full Year and Fourth Quarter Operating
Highlights
- Total subscribers on platform at December 31, 2016 were
approximately 5.371 million, compared to approximately 5.439
million subscribers at September 30, 2016 and 4.669 million
subscribers at December 31, 2015. See “Total
Subscribers” below.
- Average revenue per subscriber, or ARPS, for fiscal year 2016
was $17.53, compared to $14.18 for fiscal year 2015. ARPS for
the fourth quarter of 2016 was $18.02, compared to $14.03 for the
fourth quarter of 2015. Excluding the impact of Constant Contact,
ARPS for fiscal year 2016 was $13.65, compared to $14.18 for fiscal
year 2015 and ARPS for fourth quarter of 2016 was $13.37, compared
to $14.03 for the fourth quarter of 2015. See “Average Revenue Per
Subscriber” below.
Fiscal 2017 Guidance
The company is providing the following guidance as
of the date of this release, February 16, 2017. For the full
year ending December 31, 2017, the company expects:
|
2016 ActualAs reported |
|
Guidance(as of February 16,
2017)* |
GAAP revenue |
$1.111
billion |
|
4 – 5%
increase |
Adjusted EBITDA |
$288
million |
|
12 –
14% increase |
Free cash flow |
$112
million |
|
~35%
increase |
|
|
|
|
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.
* Percentage increases shown in the "Guidance"
column represent percentage increases over 2016 figures shown in
the adjacent column.
Conference Call and Webcast
Information
Endurance International Group’s fourth quarter and
full year 2016 financial results teleconference and webcast is
scheduled to begin at 8:00 a.m. EDT on Thursday, February 16,
2017. 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 includes or excludes amounts that are
included or 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, and impairment of
other long-lived assets. 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.
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. We
believe ARPS is an indicator of our ability to optimize our mix of
products and services and pricing and sell products and services to
new and existing subscribers. 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 2017, our
anticipated focus areas for 2017, our plans to invest in building
brand awareness for key brands and to fund operational and
infrastructure improvements to enhance the customer product and
service experience, our belief that these investments will position
us to achieve long term profitable growth and increased free cash
flow, 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,” “will,” “may”, “continue”,
“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: that we will be
unable to successfully enhance the customer product and service
experience and improve customer satisfaction and retention through
operational and infrastructure improvements; that we will encounter
difficulties or delays in our efforts to build brand awareness of
our key brands; that we will be unable to drive revenue
growth by increasing ARPS through cross-selling and other
product-related initiatives; that we will continue to experience
decreases in our subscriber base; an adverse impact on our business
from litigation or regulatory proceedings; an adverse impact on our
business from our substantial indebtedness and the cost of
servicing our debt; the rate of growth of the Small and Medium
Business (“SMB”) market for our solutions; our inability to
increase sales to our existing subscribers, or retain our existing
subscribers; system or Internet failures; our inability to maintain
or improve our competitive position or market share; and other
risks set forth under the caption “Risk Factors” in our Quarterly
Report on Form 10-Q for the period ended September 30, 2016 filed
with the SEC on November 4, 2016 and other reports we file with the
SEC.
We assume no obligation to update any
forward-looking statements contained in this document as a result
of new information, future events or otherwise.
About Endurance International
Group
Endurance International Group Holdings, Inc.
(NASDAQ:EIGI) (em)Powers millions of small businesses worldwide
with products and technology to vitalize their online web presence,
email marketing, mobile business solutions, and more. The Endurance
family of brands includes: Constant Contact, Bluehost, HostGator,
iPage, Domain.com, BigRock, SiteBuilder and SinglePlatform, among
others. Headquartered in Burlington, Massachusetts, Endurance
employs more than 4,000 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.
Endurance International Group Holdings,
Inc. |
Consolidated Balance Sheets |
(unaudited) |
(in thousands, except share and per share
amounts) |
|
|
December 31, 2015 |
|
December 31, 2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
33,030 |
|
|
$ |
53,596 |
|
Restricted cash |
1,048 |
|
|
3,302 |
|
Accounts
receivable |
12,040 |
|
|
13,088 |
|
Prepaid
domain name registry fees |
55,793 |
|
|
55,444 |
|
Prepaid
expenses and other current assets |
15,675 |
|
|
28,678 |
|
Total current
assets |
117,586 |
|
|
154,108 |
|
Property
and equipment—net |
75,762 |
|
|
95,272 |
|
Goodwill |
1,207,255 |
|
|
1,859,909 |
|
Other
intangible assets—net |
359,786 |
|
|
612,057 |
|
Deferred
financing costs |
|
— |
|
|
4,932 |
|
Investments |
27,905 |
|
|
15,857 |
|
Prepaid
domain name registry fees, net of current portion |
9,884 |
|
|
10,429 |
|
Other
assets |
4,322 |
|
|
3,710 |
|
Total assets |
$ |
1,802,500 |
|
|
$ |
2,756,274 |
|
Liabilities,
redeemable non-controlling interest and stockholders’
equity |
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
Accounts
payable |
$ |
12,280 |
|
|
$ |
16,074 |
|
Accrued
expenses |
45,779 |
|
|
67,722 |
|
Accrued
interest |
5,090 |
|
|
27,246 |
|
Deferred
revenue |
285,945 |
|
|
355,190 |
|
Current
portion of notes payable |
77,500 |
|
|
35,700 |
|
Current
portion of capital lease obligations |
5,866 |
|
|
6,690 |
|
Deferred
consideration—short term |
51,488 |
|
|
5,273 |
|
Other
current liabilities |
3,973 |
|
|
2,890 |
|
Total current
liabilities |
487,921 |
|
|
516,785 |
|
Long-term deferred
revenue |
79,682 |
|
|
89,200 |
|
Notes payable—long
term, net of original issue discounts of $0 and $25,853, and
deferred financing costs of $990 and $43,342, respectively |
1,014,885 |
|
|
1,951,280 |
|
Capital lease
obligations—long term |
7,215 |
|
|
512 |
|
Deferred tax
liability |
28,786 |
|
|
39,943 |
|
Deferred
consideration—long term |
813 |
|
|
7,444 |
|
Other liabilities |
3,524 |
|
|
8,974 |
|
Total liabilities |
|
1,622,826 |
|
|
|
2,614,138 |
|
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; 132,024,558
and 134,793,857 shares issued at December 31, 2015 and
December 31, 2016, respectively; 131,938,485 and 134,793,857
outstanding at December 31, 2015 and December 31, 2016,
respectively |
14 |
|
|
14 |
|
Additional paid-in capital |
848,740 |
|
|
868,228 |
|
Accumulated other comprehensive loss |
(1,718 |
) |
|
(3,666 |
) |
Accumulated deficit |
(667,362 |
) |
|
(740,193 |
) |
Total stockholders’
equity |
179,674 |
|
|
124,383 |
|
Total liabilities,
redeemable non-controlling interest and stockholders’ equity |
$ |
1,802,500 |
|
|
$ |
2,756,274 |
|
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, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
Revenue |
$ |
193,043 |
|
|
$ |
292,123 |
|
|
$ |
741,315 |
|
|
$ |
1,111,142 |
|
Cost of revenue |
108,351 |
|
|
145,011 |
|
|
425,035 |
|
|
583,991 |
|
Gross profit |
84,692 |
|
|
147,112 |
|
|
316,280 |
|
|
527,151 |
|
Operating expense: |
|
|
|
|
|
|
|
Sales and
marketing |
35,628 |
|
|
68,567 |
|
|
145,419 |
|
|
303,511 |
|
Engineering and development |
6,801 |
|
|
19,671 |
|
|
26,707 |
|
|
87,601 |
|
General
and administrative |
22,957 |
|
|
34,587 |
|
|
81,386 |
|
|
143,095 |
|
Transaction expenses |
4,980 |
|
|
27 |
|
|
9,582 |
|
|
32,284 |
|
Total operating
expense |
70,366 |
|
|
122,852 |
|
|
263,094 |
|
|
566,491 |
|
Income (loss) from
operations |
14,326 |
|
|
24,260 |
|
|
53,186 |
|
|
(39,340 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Other
income (loss), net |
— |
|
|
(4,703 |
) |
|
5,440 |
|
|
1,862 |
|
Interest
income |
98 |
|
|
138 |
|
|
414 |
|
|
576 |
|
Interest
expense |
(15,872 |
) |
|
(40,315 |
) |
|
(58,828 |
) |
|
(152,888 |
) |
Total other
expense—net |
(15,774 |
) |
|
(44,880 |
) |
|
(52,974 |
) |
|
(150,450 |
) |
Income (loss) before
income taxes and equity earnings of unconsolidated entities |
(1,448 |
) |
|
(20,620 |
) |
|
212 |
|
|
(189,790 |
) |
Income tax expense
(benefit) |
2,260 |
|
|
11,362 |
|
|
11,342 |
|
|
(109,858 |
) |
Loss before equity
earnings of unconsolidated entities |
(3,708 |
) |
|
(31,982 |
) |
|
(11,130 |
) |
|
(79,932 |
) |
Equity loss of
unconsolidated entities, net of tax |
5,524 |
|
|
100 |
|
|
14,640 |
|
|
1,297 |
|
Net loss |
$ |
(9,232 |
) |
|
$ |
(32,082 |
) |
|
$ |
(25,770 |
) |
|
$ |
(81,229 |
) |
Net loss attributable
to non-controlling interest |
— |
|
|
(841 |
) |
|
— |
|
|
(15,167 |
) |
Excess accretion of
non-controlling interest |
— |
|
|
3,624 |
|
|
— |
|
|
6,769 |
|
Total net income (loss)
attributable to non-controlling interest |
— |
|
|
2,783 |
|
|
— |
|
|
(8,398 |
) |
Net loss attributable
to Endurance International Group Holdings, Inc. |
$ |
(9,232 |
) |
|
$ |
(34,865 |
) |
|
$ |
(25,770 |
) |
|
$ |
(72,831 |
) |
Comprehensive
loss: |
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
77 |
|
|
(1,591 |
) |
|
(1,281 |
) |
|
(597 |
) |
Unrealized gain (loss) on cash flow hedge, net of taxes of $46 and
$97, and $46 and ($792) for the three and twelve months ended
December 31, 2015 and 2016, respectively |
80 |
|
|
515 |
|
|
80 |
|
|
(1,351 |
) |
Total comprehensive
loss |
$ |
(9,075 |
) |
|
$ |
(35,941 |
) |
|
$ |
(26,971 |
) |
|
$ |
(74,779 |
) |
Net loss per share
attributable to Endurance International Group Holdings, Inc.—basic
and diluted |
$ |
(0.07 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.55 |
) |
Weighted-average number
of common shares used in computing net loss per share attributable
to Endurance International Group Holdings, Inc.—basic and
diluted |
|
131,772,156 |
|
|
|
134,453,029 |
|
|
|
131,340,557 |
|
|
|
133,415,732 |
|
Endurance International Group Holdings,
Inc. |
Consolidated Statements of Cash
Flows |
(unaudited) |
(in thousands) |
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net
loss |
$ |
(9,232 |
) |
|
$ |
(32,082 |
) |
|
$ |
(25,770 |
) |
|
$ |
(81,229 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
Depreciation of property and equipment |
9,361 |
|
|
13,418 |
|
|
34,010 |
|
|
60,360 |
|
Amortization of other intangible assets from acquisitions |
23,866 |
|
|
37,883 |
|
|
91,057 |
|
|
143,562 |
|
Amortization of deferred financing costs |
20 |
|
|
1,751 |
|
|
82 |
|
|
6,073 |
|
Amortization of net present value of deferred consideration |
776 |
|
|
191 |
|
|
1,264 |
|
|
2,617 |
|
Amortization of original issuance discount |
— |
|
|
854 |
|
|
— |
|
|
2,970 |
|
Impairment of long lived assets |
— |
|
|
754 |
|
|
— |
|
|
9,039 |
|
Stock-based compensation |
9,653 |
|
|
10,049 |
|
|
29,925 |
|
|
58,267 |
|
Deferred
tax expense (benefit) |
1,499 |
|
|
11,305 |
|
|
7,120 |
|
|
(113,242 |
) |
Gain on
sale of assets |
— |
|
|
(75 |
) |
|
(155 |
) |
|
(243 |
) |
(Gain)
loss from unconsolidated entities |
— |
|
|
4,703 |
|
|
(5,440 |
) |
|
(1,862 |
) |
Loss of
unconsolidated entities |
5,524 |
|
|
100 |
|
|
14,640 |
|
|
1,297 |
|
Dividend
from minority interest |
— |
|
|
50 |
|
|
— |
|
|
100 |
|
(Gain)
loss from change in deferred consideration |
91 |
|
|
13 |
|
|
1,174 |
|
|
(20 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable |
83 |
|
|
(2,996 |
) |
|
(1,659 |
) |
|
(1,620 |
) |
Prepaid
expenses and other current assets |
(3,933 |
) |
|
4,274 |
|
|
(13,187 |
) |
|
(4,932 |
) |
Accounts
payable and accrued expenses |
669 |
|
|
7,164 |
|
|
9,926 |
|
|
19,458 |
|
Deferred
revenue |
5,037 |
|
|
(4,199 |
) |
|
34,241 |
|
|
54,366 |
|
Net cash provided by
operating activities |
43,414 |
|
|
53,157 |
|
|
177,228 |
|
|
154,961 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Businesses acquired in purchase transaction, net of cash
acquired |
(24,583 |
) |
|
— |
|
|
(97,795 |
) |
|
(889,634 |
) |
Purchases
of property and equipment |
(7,976 |
) |
|
(7,942 |
) |
|
(31,243 |
) |
|
(37,259 |
) |
Cash paid
for minority investment |
(1,225 |
) |
|
— |
|
|
(8,475 |
) |
|
(5,600 |
) |
Proceeds
from sale of assets |
— |
|
|
434 |
|
|
284 |
|
|
676 |
|
Proceeds
from note receivable |
— |
|
|
— |
|
|
3,454 |
|
|
— |
|
Purchases
of intangible assets |
(32 |
) |
|
— |
|
|
(76 |
) |
|
(27 |
) |
Net
(deposits) and withdrawals of principal balances in restricted cash
accounts |
159 |
|
|
181 |
|
|
50 |
|
|
(557 |
) |
Net cash used in
investing activities |
(33,657 |
) |
|
(7,327 |
) |
|
(133,801 |
) |
|
(932,401 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Proceeds
from issuance of term loan |
— |
|
|
— |
|
|
— |
|
|
1,056,178 |
|
Repayment
of term loan |
(2,625 |
) |
|
(12,425 |
) |
|
(10,500 |
) |
|
(55,200 |
) |
Proceeds
from borrowing of revolver |
38,000 |
|
|
5,000 |
|
|
147,000 |
|
|
54,500 |
|
Repayment
of revolver |
(41,000 |
) |
|
(38,500 |
) |
|
(130,000 |
) |
|
(121,500 |
) |
Payment
of financing costs |
— |
|
|
— |
|
|
— |
|
|
(52,561 |
) |
Payment
of deferred consideration |
(4,400 |
) |
|
(7,964 |
) |
|
(14,991 |
) |
|
(51,044 |
) |
Payment
of redeemable non-controlling interest liability |
— |
|
|
— |
|
|
(30,543 |
) |
|
(33,425 |
) |
Principal
payments on capital lease obligations |
(1,995 |
) |
|
(1,520 |
) |
|
(4,822 |
) |
|
(5,892 |
) |
Proceeds
from exercise of stock options |
1,077 |
|
|
260 |
|
|
2,224 |
|
|
2,564 |
|
Capital
investment from minority interest partner |
— |
|
|
— |
|
|
— |
|
|
2,776 |
|
Net cash provided by
(used in) financing activities |
(10,943 |
) |
|
(55,149 |
) |
|
(41,632 |
) |
|
796,396 |
|
Net effect of exchange
rate on cash and cash equivalents |
54 |
|
|
(233 |
) |
|
(1,144 |
) |
|
1,610 |
|
Net
increase (decrease) in cash and cash equivalents |
(1,132 |
) |
|
(9,552 |
) |
|
651 |
|
|
20,566 |
|
Cash and cash
equivalents: |
|
|
|
|
|
|
|
Beginning
of period |
34,162 |
|
|
63,148 |
|
|
32,379 |
|
|
33,030 |
|
End of
period |
$ |
33,030 |
|
|
$ |
53,596 |
|
|
$ |
33,030 |
|
|
$ |
53,596 |
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
Interest paid |
$ |
14,889 |
|
|
$ |
27,882 |
|
|
$ |
57,338 |
|
|
$ |
119,063 |
|
Income taxes paid |
$ |
536 |
|
|
$ |
879 |
|
|
$ |
4,510 |
|
|
$ |
4,278 |
|
Supplemental disclosure
of non-cash financing activities: |
|
|
|
|
|
|
|
Shares issued in
connection with the acquisition of Directi |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Assets acquired under
capital lease |
$ |
9,795 |
|
|
$ |
— |
|
|
$ |
9,795 |
|
|
$ |
— |
|
GAAP to Non-GAAP reconciliation - Adjusted
EBITDA
The following table presents a reconciliation of
net loss calculated in accordance with GAAP to adjusted EBITDA (all
data in thousands):
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
Net
loss |
$ |
(9,232 |
) |
|
$ |
(32,082 |
) |
|
$ |
(25,770 |
) |
|
$ |
(81,229 |
) |
Interest expense, net
(including impact of amortization of deferred financing costs and
original issuance discount) |
15,774 |
|
|
40,177 |
|
|
58,414 |
|
|
152,312 |
|
Income tax expense
(benefit) |
2,260 |
|
|
11,362 |
|
|
11,342 |
|
|
(109,858 |
) |
Depreciation |
9,361 |
|
|
13,418 |
|
|
34,010 |
|
|
60,360 |
|
Amortization of other
intangible assets |
23,866 |
|
|
37,883 |
|
|
91,057 |
|
|
143,562 |
|
Stock-based
compensation |
9,653 |
|
|
10,049 |
|
|
29,925 |
|
|
58,267 |
|
Restructuring
expenses |
295 |
|
|
582 |
|
|
1,489 |
|
|
24,224 |
|
Transaction expenses
and charges |
4,980 |
|
|
27 |
|
|
9,582 |
|
|
32,284 |
|
(Gain) loss of
unconsolidated entities(1) |
5,524 |
|
|
4,803 |
|
|
9,200 |
|
|
(565 |
) |
Impairment of other
long lived assets |
— |
|
|
754 |
|
|
— |
|
|
9,039 |
|
Adjusted
EBITDA |
$ |
62,481 |
|
|
$ |
86,973 |
|
|
$ |
219,249 |
|
|
$ |
288,396 |
|
(1) The (gain) loss of unconsolidated
entities is reported on a net basis for the three and twelve months
ended December 31, 2015 and 2016. The three months ended
December 31, 2016 includes a loss of $4.7 million on the impairment
of our 33% equity investment in Fortifico Limited. The three
months ended December 31, 2016 also includes a net loss of $0.1
million from our proportionate share of net losses from
unconsolidated entities. The twelve months ended December 31, 2016
includes an $11.4 million gain on our investment in WZ UK, Ltd.
This gain was generated on January 6, 2016, when we increased
our ownership stake in WZ UK from 49% to 57.5%, which required a
revaluation of our existing investment to its implied fair value.
The twelve months ended also includes a loss of $4.8 million on our
investment in AppMachine B.V. This loss was generated on July 27,
2016, when we increased our ownership stake in AppMachine from 40%
to 100%, which required a revaluation of our existing investment to
its implied fair value. These were also offset by the loss of $4.7
million on Fortifico Limited previously mentioned in this
paragraph, and by our proportionate share of net losses from
unconsolidated entities of $1.3 million.
The loss of unconsolidated entities is reported on
a net basis for the year ended December 31, 2015. The twelve months
ended December 31, 2015 includes a $5.4 million gain for the
redemption of our equity interest in World Wide Web Hosting, offset
by our proportionate share of net losses from unconsolidated
entities of $14.6 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, |
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
Cash flow from
operations |
$ |
43,414 |
|
|
$ |
53,157 |
|
|
$ |
177,228 |
|
|
$ |
154,961 |
|
Less: |
|
|
|
|
|
|
|
Capital expenditures
and capital lease obligations (1) |
(9,971 |
) |
|
(9,462 |
) |
|
(36,065 |
) |
|
(43,151 |
) |
|
|
|
|
|
|
|
|
Free cash
flow |
$ |
33,443 |
|
|
$ |
43,695 |
|
|
$ |
141,163 |
|
|
$ |
111,810 |
|
(1) Capital expenditures during the three and
twelve months ended December 31, 2015 includes $2.0 million and
$4.8 million of principal payments under a three year capital lease
for software. 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 two year capital lease for
software. The remaining balance on the capital lease is $7.2
million as of December 31, 2016.
Average Revenue Per Subscriber -
Calculation and Segment Detail
Starting with the fourth quarter of 2016, we will
present our financial results in two segments. Our Web
presence segment is our historical business before the acquisition
of Constant Contact, and includes primarily our web hosting
products, domains, website builders and related add-on
products. Our Email Marketing segment consists of the
Constant Contact business, including email marketing, event
management, survey tools and the SinglePlatform digital storefront
service.
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, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
Consolidated
revenue |
$ |
193,043 |
|
|
$ |
292,123 |
|
|
$ |
741,315 |
|
|
$ |
1,111,142 |
|
Consolidated total
subscribers |
4,669 |
|
|
5,371 |
|
|
4,669 |
|
|
5,371 |
|
Consolidated average
subscribers for the period |
4,587 |
|
|
5,405 |
|
|
4,358 |
|
|
5,283 |
|
Consolidated
average revenue per subscriber (ARPS) |
$ |
14.03 |
|
|
$ |
18.02 |
|
|
$ |
14.18 |
|
|
$ |
17.53 |
|
|
|
|
|
|
|
|
|
Web Presence
revenue |
— |
|
|
$ |
194,970 |
|
|
— |
|
|
$ |
784,334 |
|
Web Presence
subscribers |
— |
|
|
4,827 |
|
|
— |
|
|
4,827 |
|
Web Presence average
subscribers |
— |
|
|
4,860 |
|
|
— |
|
|
4,789 |
|
Web Presence
ARPS |
$ |
— |
|
|
$ |
13.37 |
|
|
$ |
— |
|
|
$ |
13.65 |
|
|
|
|
|
|
|
|
|
Email Marketing
revenue |
— |
|
|
$ |
97,153 |
|
|
— |
|
|
$ |
326,808 |
|
Email Marketing
subscribers |
— |
|
|
544 |
|
|
— |
|
|
544 |
|
Email Marketing average
subscribers |
— |
|
|
545 |
|
|
— |
|
|
494 |
|
Email Marketing
ARPS |
$ |
— |
|
|
$ |
59.43 |
|
|
$ |
— |
|
|
$ |
55.11 |
|
The following table presents a reconciliation by
segment of net loss calculated in accordance with GAAP to adjusted
EBITDA (all data in thousands):
|
Three Months Ended December 31,
2016 |
|
Twelve Months Ended December 31,
2016 |
|
Web Presence |
Email Marketing |
Total |
|
Web Presence |
Email Marketing |
Total |
|
|
|
|
Revenue |
$ |
194,970 |
|
$ |
97,153 |
|
$ |
292,123 |
|
|
$ |
784,334 |
|
$ |
326,808 |
|
$ |
1,111,142 |
|
Gross profit |
88,379 |
|
58,733 |
|
147,112 |
|
|
353,988 |
|
173,163 |
|
527,151 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
46,075 |
|
$ |
40,898 |
|
$ |
86,973 |
|
|
$ |
172,135 |
|
$ |
116,261 |
|
$ |
288,396 |
|
Interest expense,
net |
17,504 |
|
22,673 |
|
40,177 |
|
|
70,843 |
|
81,469 |
|
152,312 |
|
Income tax expense
(benefit) |
13,718 |
|
(2,356 |
) |
11,362 |
|
|
(76,315 |
) |
(33,543 |
) |
(109,858 |
) |
Depreciation |
9,364 |
|
4,054 |
|
13,418 |
|
|
36,613 |
|
23,747 |
|
60,360 |
|
Amortization of other
intangible assets |
19,630 |
|
18,253 |
|
37,883 |
|
|
78,883 |
|
64,679 |
|
143,562 |
|
Stock-based
compensation |
8,084 |
|
1,965 |
|
10,049 |
|
|
45,864 |
|
12,403 |
|
58,267 |
|
Restructuring
expenses |
349 |
|
233 |
|
582 |
|
|
1,845 |
|
22,379 |
|
24,224 |
|
Transaction expenses
and charges |
27 |
|
— |
|
27 |
|
|
31,300 |
|
984 |
|
32,284 |
|
(Gain) loss of
unconsolidated entities (1) |
4,803 |
|
— |
|
4,803 |
|
|
(565 |
) |
— |
|
(565 |
) |
Impairment of other
long lived assets |
754 |
|
— |
|
754 |
|
|
9,039 |
|
— |
|
9,039 |
|
Net income (loss) |
$ |
(28,158 |
) |
$ |
(3,924 |
) |
$ |
(32,082 |
) |
|
$ |
(25,372 |
) |
$ |
(55,857 |
) |
$ |
(81,229 |
) |
(1) The (gain) loss of unconsolidated
entities is reported on a net basis for the three and twelve months
ended December 31, 2015 and 2016. The three months ended
December 31, 2016 includes a loss of $4.7 million on the impairment
of our 33% equity investment in Fortifico Limited. The three
months ended December 31, 2016 also includes a net loss of $0.1
million from our proportionate share of net losses from
unconsolidated entities. The twelve months ended December 31, 2016
includes an $11.4 million gain on our investment in WZ UK, Ltd.
This gain was generated on January 6, 2016, when we increased
our ownership stake in WZ UK from 49% to 57.5%, which required a
revaluation of our existing investment to its implied fair value.
The twelve months ended also includes a loss of $4.8 million on our
investment in AppMachine B.V. This loss was generated on July 27,
2016, when we increased our ownership stake in AppMachine from 40%
to 100%, which required a revaluation of our existing investment to
its implied fair value. These were also offset by the loss of $4.7
million on Fortifico Limited previously mentioned in this
paragraph, and by our proportionate share of net losses from
unconsolidated entities of $1.3 million.
GAAP to Non-GAAP Reconciliation of Fiscal
Year 2017 Guidance (as of February 16, 2017) - Adjusted
EBITDA
The following table reflects the reconciliation of
fiscal year 2017 estimated net loss calculated in accordance with
GAAP to fiscal year 2017 guidance for adjusted EBITDA at the high
end of the guidance range (i.e. assuming a 12% increase over 2016
adjusted EBITDA as reported). All figures shown are
approximate.
($ in millions) |
Twelve Months Ending December 31,
2017 |
Estimated net
loss |
$ |
(91 |
) |
|
Estimated interest
expense (net) |
148 |
|
|
Estimated income tax
expense (benefit) |
10 |
|
|
Estimated
depreciation |
56 |
|
|
Estimated amortization
of acquired intangible assets |
137 |
|
|
Estimated stock-based
compensation |
57 |
|
|
Estimated restructuring
expenses |
8 |
|
|
Estimated transaction
expenses and charges |
— |
|
|
Estimated (gain) loss
of unconsolidated entities |
— |
|
|
Estimated impairment of
other long-lived assets |
— |
|
|
Adjusted EBITDA
guidance |
|
|
|
$ |
325 |
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation of Fiscal Year 2017
Guidance (as of February 16, 2017) - Free Cash Flow
The following table reflects the reconciliation of fiscal year
2017 estimated cash flow from operations calculated in accordance
with GAAP to fiscal year 2017 guidance for free cash flow. All
figures shown are approximate.
($ in millions) |
Twelve Months Ending December 31,
2017 |
Estimated cash
flow from operations |
$ |
205 |
|
|
Estimated capital
expenditures and capital lease obligations |
(55 |
) |
|
Free cash flow
guidance |
|
|
|
$ |
150 |
|
|
|
|
|
|
|
|
Investor Contact:
Lynn Harrison
Endurance International Group
(781) 852-3450
ir@endurance.com
Press Contact:
Lark-Marie Antón
Endurance International Group
(646) 887-7272
press@endurance.com
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