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Endurance International Group Reports 2018 Third Quarter Results
Globe Newswire 25-Oct-2018 7:05 AM
GAAP revenue of $283.8 million
Net loss of $6.3 million
Adjusted EBITDA of $87.5 million
Cash flow from operations of $51.3 million
Free cash flow of $40.7 million
Total subscribers on platform were approximately 4.852 million at September 30, 2018
BURLINGTON, Mass., Oct. 25, 2018 (GLOBE NEWSWIRE) -- 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, 2018.
"We are pleased with our third quarter results and the operational progress we have made year to date," commented Jeffrey H. Fox, president and chief executive officer of Endurance International Group. "Our investment plans for 2018 were designed to simplify the business and deliver increased value to our customers. We believe we are positioned to transition back to revenue growth in 2019 as we deliver expanded solution value to customers of our key strategic brands."
Third Quarter 2018 Financial Highlights
Revenue for the third quarter of 2018 was $283.8 million, a decrease of 3.9 percent compared to $295.2 million for the third quarter of 2017.
Net loss for the third quarter of 2018 was $6.3 million compared to net loss of $40.3 million for the third quarter of 2017.
Net loss attributable to Endurance International Group Holdings, Inc. for the third quarter of 2018 was $6.3 million, or $(0.04) per diluted share, compared to net loss of $40.3 million, or $(0.29) per diluted share, for the third quarter of 2017.
Adjusted EBITDA for the third quarter of 2018 was $87.5 million, a decrease of 6.7 percent compared to $93.8 million for the third quarter of 2017.
Cash flow from operations for the third quarter of 2018 was $51.3 million, an increase of 10.5 percent compared to $46.4 million for the third quarter of 2017.
Free cash flow, defined as cash flow from operations less capital expenditures and capital lease obligations, for the third quarter of 2018 was $40.7 million, an increase of 27.6 percent compared to $31.9 million for the third quarter of 2017.
Third Quarter Operating Highlights
Total subscribers on platform at September 30, 2018 were approximately 4.852 million, compared to approximately 5.122 million subscribers at September 30, 2017 and approximately 4.918 million subscribers at June 30, 2018. See "Total Subscribers" below.
Average revenue per subscriber, or ARPS, for the third quarter of 2018 was $19.36, compared to $19.03 for the third quarter of 2017 and $19.32 for the second quarter of 2018. See "Average Revenue Per Subscriber" below.
Fiscal 2018 Guidance
The Company is updating its guidance for the full year ending December 31, 2018. As of the date of this release, October 25, 2018, the Company expects:
2017 Actual as Reported
Prior Guidance
Revised Guidance (as of October 25, 2018)
GAAP revenue
$1.177 billion
$1.140 to $1.160 billion
$1.140 to $1.150 billion
Adjusted EBITDA
$351 million
$310 to $330 million
$330 to $335 million
Free cash flow
$151 million
~$120 million
~$120 million
As previously disclosed, the Company's free cash flow guidance does not reflect the impact of the payment made in the second quarter of 2018 pursuant to its settlement with the U.S. Securities & Exchange Commission, or anticipated payments pursuant to the securities class action lawsuit settlements described in the Company's Form 8-K filed on May 18, 2018. The class action lawsuit settlements remain subject to court approval, and will impact the Company's actual free cash flow for 2018 if approved by the court and paid this year.
Adjusted EBITDA and free cash flow are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP is provided in the financial statement tables included at the end of this press release.
First and Second Quarter 2018 Income Tax Expense Revision
The Company has revised its deferred income tax provision for the first and second quarter of 2018 to reflect a revision that favorably impacted net income (loss) for these periods. This revision does not impact the previously reported figures for Adjusted EBITDA, Cash Flow from Operations or Free Cash Flow.
During fiscal year 2017, the Company began a process to reorganize, and in some instances, eliminate legal entities associated with certain products introduced in 2015 and 2016. This reorganization is expected to provide tax benefits, as the Company can deduct losses on the investments in these entities in its U.S. income tax filings. After further review of these losses, the Company has determined that a significant portion of these losses should have been reflected in its 2017 income tax provision calculations. This change in position does not impact the actual income tax provision recorded in 2017; however, due to the changes enacted in the 2017 Tax Cuts and Jobs Act, the manner in which net operating loss carryforwards are handled does impact the Company's 2018 provision for non-cash deferred income taxes. The details of the first and second quarter revision are shown in the tables at the end of this press release.
Conference Call and Webcast Information
Endurance International Group's third quarter 2018 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EDT on Thursday, October 25, 2018. To participate on the live call, analysts and investors should dial (888) 734-0328 at least ten minutes prior to the call. Endurance International Group will also offer a live and archived webcast of the conference call, accessible from the Investor Relations section of the company's website at http://ir.endurance.com.
Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, we use adjusted EBITDA and free cash flow, which are non-GAAP financial measures, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions. A non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flow that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP or includes amounts that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. For example, adjusted EBITDA excludes interest expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business. The presentation of non-GAAP financial information is not meant to be considered in isolation from, or as a substitute for, the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the additional information about adjusted EBITDA and free cash flow shown below, including the reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, (gain) loss of unconsolidated entities, impairment of other long-lived assets, SEC investigations reserve (with respect to fiscal year and third quarter 2017), 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 capital lease obligations. We believe that FCF provides investors with an indicator of our ability to generate positive cash flows after meeting our obligations with regard to capital expenditures (including capital lease obligations).
Key Operating Metrics
Total Subscribers - We define total subscribers as the approximate number of subscribers that, as of the end of a period, are identified as subscribing directly to our products on a paid basis, excluding accounts that access our solutions via resellers or that purchase only domain names from us. Subscribers of more than one brand, and subscribers with more than one distinct billing relationship or subscription with us, are counted as separate subscribers. Total subscribers for a period reflects adjustments to add or subtract subscribers as we integrate acquisitions and/or are otherwise able to identify subscribers that meet, or do not meet, this definition of total subscribers. In the third quarter of 2018, these adjustments had a negligible impact on our total subscriber count.
Average Revenue Per Subscriber (ARPS) - We calculate ARPS as the amount of revenue we recognize in a period, including marketing development funds and other revenue not received from subscribers, divided by the average of the number of total subscribers at the beginning of the period and at the end of the period, which we refer to as average subscribers for the period, divided by the number of months in the period. See definition of "Total Subscribers" above. ARPS does not represent an exact measure of the average amount a subscriber spends with us each month, since our calculation of ARPS is impacted by revenues generated by non-subscribers.
Forward-Looking Statements This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements concerning our financial guidance for fiscal year 2018, our belief that we are positioned to transition back to revenue growth in 2019, our investment and operational plans, including our ability to execute these plans and expectations that these plans will simplify our business and deliver increased customer value, our expectation that our reorganization or elimination of certain of our legal entities will provide us with tax benefits, 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," "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 may differ from expectations; the possibility that we may not be able to executive our investment or operational plans or that these plans will not result in the anticipated benefits to our business; the possibility that we will continue to experience decreases in our subscriber base; an adverse impact on our business from litigation or regulatory proceedings; an adverse impact on our business from our substantial indebtedness and the cost of servicing our debt; the rate of growth of the Small and Medium Business ("SMB") market for our solutions; our inability to increase sales to our existing subscribers, or retain our existing subscribers; data breaches; system or Internet failures; our inability to maintain or improve our competitive position or market share; and other risks and uncertainties discussed in our filings with the SEC, including those set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the three months ended June 30, 2018 filed with the SEC on August 2, 2018 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) 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.
Investor Contact: Angela White Endurance International Group (781) 852-3450 ir@endurance.com
Press Contact: Kristen Andrews Endurance International Group (781) 418-6716 press@endurance.com
Endurance International Group Holdings, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts)
December 31, 2017
September 30, 2018
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
66,493
$
89,674
Restricted cash
2,625
1,832
Accounts receivable
15,945
14,105
Prepaid domain name registry fees
53,805
57,114
Prepaid commissions
—
41,744
Prepaid expenses and other current assets
29,327
27,101
Total current assets
168,195
231,570
Property and equipment—net
95,452
79,315
Goodwill
1,850,582
1,849,264
Other intangible assets—net
455,440
377,670
Deferred financing costs
3,189
2,879
Investments
15,267
15,266
Prepaid domain name registry fees, net of current portion
10,806
11,337
Prepaid commissions, net of current portion
—
42,081
Other assets
2,155
9,021
Total assets
$
2,601,086
$
2,618,403
Liabilities, redeemable non-controlling interest and stockholders' equity
Current liabilities:
Accounts payable
$
11,058
$
10,812
Accrued expenses
79,991
70,204
Accrued interest
24,457
15,109
Deferred revenue
361,940
380,564
Current portion of notes payable
33,945
31,606
Current portion of capital lease obligations
7,630
7,595
Deferred consideration—short term
4,365
2,386
Other current liabilities
4,031
3,753
Total current liabilities
527,417
522,029
Long-term deferred revenue
90,972
96,419
Notes payable—long term, net of original issue discounts of $25,811 and $22,445 and deferred financing costs of $37,736 and $33,515, respectively
1,858,300
1,792,436
Capital lease obligations—long term
7,719
2,067
Deferred tax liability
19,696
36,498
Deferred consideration—long term
3,551
1,342
Other liabilities
10,426
11,014
Total liabilities
2,518,081
2,461,805
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; 140,190,695 and 143,306,748 shares issued at December 31, 2017 and September 30, 2018, respectively; 140,190,695 and 143,306,411 outstanding at December 31, 2017 and September 30, 2018, respectively
14
14
Additional paid-in capital
931,033
953,971
Accumulated other comprehensive loss
(541
)
(1,033
)
Accumulated deficit
(847,501
)
(796,354
)
Total stockholders' equity
83,005
156,598
Total liabilities and stockholders' equity
$
2,601,086
$
2,618,403
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,
2017
2018
2017
2018
Revenue
$
295,222
$
283,770
$
882,617
$
862,896
Cost of revenue
158,865
128,945
454,197
393,597
Gross profit
136,357
154,825
428,420
469,299
Operating expense:
Sales and marketing
66,276
63,831
211,154
197,733
Engineering and development
19,882
22,683
60,393
64,559
General and administrative
51,269
25,693
130,929
95,212
Transaction expenses
—
—
773
—
Total operating expense
137,427
112,207
403,249
357,504
(Loss) income from operations
(1,070
)
42,618
25,171
111,795
Other income (expense):
Other income (expense), net
(600
)
—
(600
)
—
Interest income
203
289
506
720
Interest expense
(35,848
)
(37,527
)
(121,022
)
(111,923
)
Total other expense—net
(36,245
)
(37,238
)
(121,116
)
(111,203
)
(Loss) income before income taxes and equity earnings of unconsolidated entities
(37,315
)
5,380
(95,945
)
592
Income tax expense
2,982
11,715
11,384
8,826
Loss before equity earnings of unconsolidated entities
(40,297
)
(6,335
)
(107,329
)
(8,234
)
Equity (income) loss of unconsolidated entities, net of tax
(33
)
—
(72
)
2
Net loss
$
(40,264
)
$
(6,335
)
$
(107,257
)
$
(8,236
)
Net loss attributable to non-controlling interest
—
—
277
—
Excess accretion of non-controlling interest
—
—
7,247
—
Total net loss attributable to non-controlling interest
—
—
7,524
—
Net loss attributable to Endurance International Group Holdings, Inc.
$
(40,264
)
$
(6,335
)
$
(114,781
)
$
(8,236
)
Comprehensive income (loss):
Foreign currency translation adjustments
1,070
(644
)
2,984
(2,489
)
Unrealized gain (loss) on cash flow hedge, net of taxes of $48 and $256, and $(182) and $626 for the three and nine months ended September 30, 2017 and 2018, respectively
83
812
(309
)
1,996
Total comprehensive loss
$
(39,111
)
$
(6,167
)
$
(112,106
)
$
(8,729
)
Basic net loss per share attributable to Endurance International Group Holdings, Inc.
$
(0.29
)
$
(0.04
)
$
(0.84
)
$
(0.06
)
Diluted net loss per share attributable to Endurance International Group Holdings, Inc.
$
(0.29
)
$
(0.04
)
$
(0.84
)
$
(0.06
)
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.:
Basic
137,793,609
143,107,122
136,688,115
141,946,574
Diluted
137,793,609
143,107,122
136,688,115
141,946,574
Endurance International Group Holdings, Inc. Consolidated Statements of Cash Flows (unaudited) (in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2018
2017
2018
Cash flows from operating activities:
Net loss
$
(40,264
)
$
(6,335
)
$
(107,257
)
$
(8,236
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation of property and equipment
13,571
11,889
40,733
36,753
Amortization of other intangible assets
35,347
26,177
104,554
77,890
Impairment of long lived assets
13,848
—
13,848
—
Impairment of investments
600
—
600
—
Amortization of deferred financing costs
1,873
1,722
5,403
4,708
Amortization of net present value of deferred consideration
127
60
504
311
Dividend from minority interest
50
—
100
—
Amortization of original issue discounts
1,059
1,083
2,791
3,209
Stock-based compensation
19,580
7,550
48,749
21,932
Deferred tax expense (benefit)
2,096
13,323
6,442
8,839
Loss (gain) on sale of assets
(189
)
(70
)
(317
)
191
(Gain) loss of unconsolidated entities
(33
)
—
(72
)
2
Financing costs expensed
—
—
5,487
1,228
Loss on early extinguishment of debt
—
—
992
331
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
(2,231
)
(2,053
)
(872
)
1,687
Prepaid expenses and other current assets
833
5,527
(510
)
(3,033
)
Accounts payable and accrued expenses
1,695
(2,841
)
(7,309
)
(15,721
)
Deferred revenue
(1,518
)
(4,691
)
15,000
3,502
Net cash provided by operating activities
46,444
51,341
128,866
133,593
Cash flows from investing activities:
Purchases of property and equipment
(12,800
)
(8,962
)
(32,095
)
(22,343
)
Proceeds from sale of assets
5
6
292
6
Purchases of intangible assets
(286
)
—
(1,966
)
—
Net cash used in investing activities
(13,081
)
(8,956
)
(33,769
)
(22,337
)
Cash flows from financing activities:
Proceeds from issuance of term loan and notes, net of original issue discounts
—
—
1,693,007
1,580,305
Repayments of term loans
(18,486
)
(25,401
)
(1,733,147
)
(1,656,094
)
Payment of financing costs
(244
)
(285
)
(6,304
)
(1,580
)
Payment of deferred consideration
—
(304
)
(5,408
)
(4,500
)
Payment of redeemable non-controlling interest
(25,000
)
—
(25,000
)
—
Principal payments on capital lease obligations
(1,771
)
(1,700
)
(5,679
)
(5,609
)
Proceeds from exercise of stock options
416
300
1,548
756
Net cash used in financing activities
(45,085
)
(27,390
)
(80,983
)
(86,722
)
Net effect of exchange rate on cash and cash equivalents and restricted cash
80
(658
)
2,156
(2,146
)
Net increase (decrease) in cash and cash equivalents and restricted cash
(11,642
)
14,337
16,270
22,388
Cash and cash equivalents and restricted cash:
Beginning of period
84,810
77,169
56,898
69,118
End of period
$
73,168
$
91,506
$
73,168
$
91,506
Supplemental cash flow information:
Interest paid
$
38,154
$
37,678
$
118,276
$
110,139
Income taxes paid
$
1,499
$
1,603
$
3,958
$
3,725
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 Ended September 30,
Nine Months Ended September 30,
2017
2018
2017
2018
Net loss
$
(40,264
)
$
(6,335
)
$
(107,257
)
$
(8,236
)
Interest expense, net(1)
35,645
37,238
120,516
111,203
Income tax expense (benefit)
2,982
11,715
11,384
8,826
Depreciation
13,571
11,889
40,733
36,753
Amortization of other intangible assets
35,347
26,177
104,554
77,890
Stock-based compensation
19,580
7,550
48,749
21,932
Restructuring expenses
4,489
197
14,584
3,021
Transaction expenses and charges
—
—
773
—
(Income) loss of unconsolidated entities
(33
)
—
(72
)
2
Impairment of other long-lived assets
14,448
—
14,448
—
SEC investigations reserve
8,000
—
8,000
—
Shareholder litigation reserve
—
(935
)
—
7,325
Adjusted EBITDA
$
93,765
$
87,496
$
256,412
$
258,716
(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,
2017
2018
2017
2018
Cash flow from operations
$
46,444
$
51,341
$
128,866
$
133,593
Less:
Capital expenditures and capital lease obligations(1)
(14,571
)
(10,662
)
(37,774
)
(27,952
)
Free cash flow
$
31,873
$
40,679
$
91,092
$
105,641
(1) Capital expenditures during the three and nine months ended September 30, 2017 and 2018 includes $1.8 million and $1.7 million, and $5.7 million and $5.6 million, respectively, of principal payments under a three year capital lease for software. The remaining balance on the capital lease is $9.7 million as of September 30, 2018.
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 and related products such as website security, website design tools and services, and e-commerce products.
Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the SinglePlatform digital storefront product.
Domain. The domain segment consists of domain-focused brands and certain web hosting brands that are aligned with our domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking.
The following table presents the calculation of ARPS, on a consolidated basis and by segment (all data in thousands, except ARPS data):
Three Months Ended September 30,
Nine Months Ended September 30,
2017
2018
2017
2018
Consolidated revenue
$
295,222
$
283,770
$
882,617
$
862,896
Consolidated total subscribers
5,122
4,852
5,122
4,852
Consolidated average subscribers for the period
5,170
4,885
5,247
4,951
Consolidated ARPS
$
19.03
$
19.36
$
18.69
$
19.36
Web presence revenue
$
159,530
$
149,871
$
483,661
$
457,603
Web presence subscribers
3,957
3,682
3,957
3,682
Web presence average subscribers for the period
3,999
3,709
4,079
3,765
Web presence ARPS
$
13.30
$
13.47
$
13.18
$
13.50
Email marketing revenue
$
101,526
$
102,111
$
298,401
$
306,712
Email marketing subscribers(1)
523
499
523
499
Email marketing average subscribers for the period
527
502
533
509
Email marketing ARPS
$
64.26
$
67.88
$
62.16
$
66.97
Domain revenue
$
34,166
$
31,788
$
100,555
$
98,581
Domain subscribers
642
671
642
671
Domain average subscribers for the period
644
674
635
677
Domain ARPS
$
17.68
$
15.71
$
17.59
$
16.18
(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. These changes took place in the three months ended June 30, 2018, as previously disclosed.
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, 2017
Web presence
Email marketing
Domain
Total
Revised(2)
Revenue
$
159,530
$
101,526
$
34,166
$
295,222
Gross profit
$
77,032
$
65,286
$
(5,961
)
$
136,357
Net (loss) income
$
(20,403
)
$
2,202
$
(22,063
)
$
(40,264
)
Interest expense, net(1)
14,686
20,514
445
35,645
Income tax expense (benefit)
798
1,323
861
2,982
Depreciation
9,399
3,233
939
13,571
Amortization of other intangible assets
14,884
18,770
1,693
35,347
Stock-based compensation
15,510
1,668
2,402
19,580
Restructuring expenses
3,468
682
339
4,489
Transaction expenses and charges
—
—
—
—
(Gain) loss of unconsolidated entities
(33
)
—
—
(33
)
Impairment of other long-lived assets
600
—
13,848
14,448
SEC investigations reserve
4,323
2,751
926
8,000
Shareholder litigation reserve
—
—
—
—
Adjusted EBITDA
$
43,232
$
51,143
$
(610
)
$
93,765
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
Transaction expenses and charges
—
—
—
—
(Gain) loss of unconsolidated entities
—
—
—
—
Impairment of other long-lived assets
—
—
—
—
SEC investigations reserve
—
—
—
—
Shareholder litigation reserve
(768
)
—
(167
)
(935
)
Adjusted EBITDA
$
37,900
$
48,438
$
1,158
$
87,496
Nine Months Ended September 30, 2017
Web presence
Email marketing
Domain
Total
Revised(2)
Revenue
$
483,661
$
298,401
$
100,555
$
882,617
Gross profit
$
229,186
$
188,181
$
11,053
$
428,420
Net loss
$
(67,226
)
$
(8,026
)
$
(32,005
)
$
(107,257
)
Interest expense, net(1)
50,877
68,212
1,427
120,516
Income tax expense (benefit)
12,645
(4,821
)
3,560
11,384
Depreciation
27,401
10,632
2,700
40,733
Amortization of other intangible assets
44,431
55,697
4,426
104,554
Stock-based compensation
38,023
5,392
5,334
48,749
Restructuring expenses
8,944
4,743
897
14,584
Transaction expenses and charges
—
773
—
773
(Gain) loss of unconsolidated entities
(72
)
—
—
(72
)
Impairment of other long-lived assets
600
—
13,848
14,448
SEC investigations reserve
4,323
2,751
926
8,000
Shareholder litigation reserve
—
—
—
—
Adjusted EBITDA
$
119,946
$
135,353
$
1,113
$
256,412
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
Transaction expenses and charges
—
—
—
—
Loss of unconsolidated entities
2
—
—
2
Impairment of other long-lived assets
—
—
—
—
SEC investigations reserve
—
—
—
—
Shareholder litigation reserve
4,780
1,500
1,045
7,325
Adjusted EBITDA
$
112,997
$
139,422
$
6,297
$
258,716
(1) Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income. (2) As disclosed in the first quarter of 2018, we revised the allocation of our 2017 adjusted EBITDA between our web presence and domain segment to correct a misallocation of domain registration costs in our previously reported segment figures. This correction resulted in the reallocation of adjusted EBITDA from the domain segment to the web presence segment of $1.9 million and $4.9 million for the three and nine months ending September 30, 2017, respectively. Consolidated adjusted EBITDA figures for these periods were not affected by this correction.
The following table represents the impact of the income statement revision to the first and second quarters of 2018 due to the revised deferred income tax provision (in thousands, except per share data):
Three Months Ended March 31, 2018
Three Months Ended June 30, 2018
Originally Filed
Adjustment
Revised
Originally Filed
Adjustment
Revised
Loss before income taxes and equity earnings of unconsolidated subsidiaries
$
(4,444
)
$
—
$
(4,444
)
$
(344
)
$
—
$
(344
)
Income tax expense (benefit)
2,617
(4,560
)
(1,943
)
1,650
(2,596
)
(946
)
Loss before equity earnings of unconsolidated subsidiaries
(7,061
)
$
4,560
$
(2,501
)
(1,994
)
$
2,596
$
602
Equity (income) loss of unconsolidated subsidiaries
27
—
27
$
(25
)
(25
)
Net income (loss)
$
(7,088
)
$
4,560
$
(2,528
)
$
(1,969
)
$
2,596
$
627
Comprehensive income (loss)
Foreign currency translation
580
—
580
(2,425
)
—
(2,425
)
Unrealized (gain) loss on cash flow hedge, net of tax
1,041
—
1,041
144
—
144
Total comprehensive loss
$
(5,467
)
$
4,560
$
(907
)
$
(4,250
)
$
2,596
$
(1,654
)
Basic net income (loss) per share
$
(0.05
)
$
0.03
$
(0.02
)
$
(0.01
)
$
0.01
$
0.00
Diluted net income (loss) per share
$
(0.05
)
$
0.03
$
(0.02
)
$
(0.01
)
$
0.01
$
0.00
Weighted-average common shares used in computing net income (loss) per share
Basic
140,361,982
—
140,361,982
142,340,561
—
142,340,561
Diluted
140,361,982
—
140,361,982
142,340,561
2,361,441
144,702,002
The following table represents the impact of the revised deferred income tax provision on the impacted balance sheet accounts as of the dates shown (in thousands):
March 31, 2018
June 30, 2018
Originally Filed
Adjustment
Revised
Originally Filed
Adjustment
Revised
Deferred tax liability
27,679
(4,560
)
23,119
29,897
(7,156
)
22,741
Total liabilities
2,533,619
(4,560
)
2,529,059
2,490,106
(7,156
)
2,482,950
Accumulated deficit
(795,206
)
4,560
(790,646
)
(797,175
)
7,156
(790,019
)
Total stockholders' equity
144,189
4,560
148,749
147,759
7,156
154,915
Total liabilities and stockholders' equity
2,677,808
—
2,677,808
2,637,865
—
2,637,865
The following table represents the impact of the revised deferred income tax provision on the impacted lines of the statement of cash flows for the periods shown (in thousands):
Three Months Ended March 31, 2018
Three Months Ended June 30, 2018
Originally Filed
Adjustment
Revised
Originally Filed
Adjustment
Revised
Net income (loss)
(7,088
)
4,560
(2,528
)
(9,057
)
7,156
(1,901
)
Deferred tax expense
492
(4,560
)
(4,068
)
2,672
(7,156
)
(4,484
)
Net cash provided by operating activities
52,360
—
52,360
82,252
—
82,252
GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of October 25, 2018) - Adjusted EBITDA
The following table reflects the reconciliation of fiscal year 2018 estimated net loss calculated in accordance with GAAP to fiscal year 2018 guidance for adjusted EBITDA. All figures shown are approximate.
($ in millions)
Twelve Months Ending December 31, 2018
Estimated net loss
$
(8
)
$
(3
)
Estimated interest expense (net)
150
150
Estimated income tax expense (benefit)
(6
)
(6
)
Estimated depreciation
50
50
Estimated amortization of acquired intangible assets
104
104
Estimated stock-based compensation
30
30
Estimated restructuring expenses
3
3
Estimated transaction expenses and charges
—
—
Estimated (gain) loss of unconsolidated entities
—
—
Estimated impairment of other long-lived assets
—
—
Estimated shareholder litigation reserve
7.3
7.3
Adjusted EBITDA guidance
$
330
$
335
GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of October 25, 2018) - Free Cash Flow
The following table reflects the reconciliation of fiscal year 2018 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2018 guidance for free cash flow. All figures shown are approximate.
($ in millions)
Twelve Months Ending December 31, 2018
Estimated cash flow from operations
$
178
Estimated capital expenditures and capital lease obligations
