8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 1, 2018

 

 

Endurance International Group Holdings, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   001- 36131   46-3044956

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

10 Corporate Drive, Suite 300

Burlington, MA

  01803
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (781) 852-3200

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐


Item 2.02. Results of Operations and Financial Condition

On May 1, 2018, Endurance International Group Holdings, Inc. (the “Company”) issued a press release announcing certain financial results and other information for the quarter ended March 31, 2018. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

(d) The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed:

99.1    Press release issued by Endurance International Group Holdings, Inc. on May 1, 2018


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.
Date: May 1, 2018     By:   /s/ Marc Montagner
        (Signature)
     

Name:

Title:

 

Marc Montagner

Chief Financial Officer

EX-99.1

Exhibit 99.1

LOGO

Endurance International Group Reports 2018 First Quarter Results

 

    GAAP revenue of $291.4 million

 

    Net loss of $7.1 million

 

    Adjusted EBITDA of $86.2 million

 

    Cash flow from operations of $52.4 million

 

    Free cash flow of $44.9 million

 

    Total subscribers on platform were approximately 5.011 million at March 31, 2018

BURLINGTON, MA (May 1, 2018) — 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 first quarter ended March 31, 2018.

“We are pleased with our financial and operating progress in the first quarter,” commented Jeffrey H. Fox, president and chief executive officer of Endurance International Group. “With a majority of the year still ahead of us, we remain focused on executing our integrated operating plan. In 2018 we are investing to deliver increased customer value in our market-leading assets and simplify our operations to execute more effectively at scale.”

First Quarter 2018 Financial Highlights

 

  Revenue for the first quarter of 2018 was $291.4 million, a decrease of 1 percent compared to $295.1 million for the first quarter of 2017.

 

  Net loss for the first quarter of 2018 was $7.1 million compared to net loss of $31.6 million for the first quarter of 2017.

 

  Net loss attributable to Endurance International Group Holdings, Inc. for the first quarter of 2018 was $7.1 million, or $(0.05) per diluted share, compared to net loss of $35.4 million, or $(0.26) per diluted share, for the first quarter of 2017.

 

 

Adjusted EBITDA for the first quarter of 2018 was $86.2 million, an increase of 8 percent compared to $80.1 million for the first quarter of 2017. First quarter 2018 adjusted EBITDA excludes the impact of a total of $8.5 million of accrued expense reserved in connection with our ongoing efforts to resolve two shareholder lawsuits, each brought as a class action against either Endurance or Constant Contact. Any final settlement agreement reached with the plaintiffs in each case would be


 

subject to court approval. Thus, we can make no assurance that any final agreement will be reached, or that any final settlement agreement will be approved by the court.

 

  Cash flow from operations for the first quarter of 2018 was $52.4 million, an increase of 55 percent compared to $33.7 million for the first quarter of 2017.

 

  Free cash flow, defined as cash flow from operations less capital expenditures and capital lease obligations, for the first quarter of 2018 was $44.9 million, an increase of 100 percent compared to $22.4 million for the first quarter of 2017.

First Quarter Operating Highlights

 

  Total subscribers on platform at March 31, 2018 were approximately 5.011 million, compared to approximately 5.304 million subscribers at March 31, 2017 and approximately 5.051 million subscribers at December 31, 2017. See “Total Subscribers” below.

 

  Average revenue per subscriber, or ARPS, for the first quarter of 2018 was $19.30, compared to $18.43 for the first quarter of 2017 and $19.28 for the fourth quarter of 2017. See “Average Revenue Per Subscriber” below.

Fiscal 2018 Guidance

The company’s prior guidance, announced on February 13, 2018, remains unchanged. As of the date of this release, May 1, 2018, for the full year ending December 31, 2018, the company expects:

 

     

2017 Actual

as Reported

  

Guidance

(as of May 1, 2018)

GAAP revenue

   $1.177 billion    $1.140 to $1.160 billion

Adjusted EBITDA

   $351 million    $310 to $330 million

Free cash flow

   $151 million    ~$120 million

Free cash flow guidance does not include the impact of potential settlements of pending legal proceedings. Adjusted EBITDA and free cash flow are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP is provided in the financial statement tables included at the end of this press release.

Conference Call and Webcast Information

Endurance International Group’s first quarter 2018 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EDT on Tuesday, May 1, 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.

 

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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

 

3


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 for the first quarter of 2018.

Average Revenue Per Subscriber (ARPS)—We calculate ARPS as the amount of revenue we recognize in a period, including marketing development funds and other revenue not received from subscribers, divided by the average of the number of total subscribers at the beginning of the period and at the end of the period, which we refer to as average subscribers for the period, divided by the number of months in the period. See definition of “Total Subscribers” above. ARPS does not represent an exact measure of the average amount a subscriber spends with us each month, since our calculation of ARPS is impacted by revenues generated by non-subscribers.

Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements concerning our financial guidance for fiscal year 2018, our expectations regarding our investments to deliver increased customer value, simplify our operations, and operate more effectively at scale, and our expected financial and operational performance in general. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts, and statements identified by words such as “expects,” “believes,” “estimates,” “may,” “continue,” “positions,” “confident,” and variations of such words or words of similar meaning and the use of future dates. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that these plans, intentions, expectations, 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 (including due to our payment of any potential settlements of pending legal proceedings); the possibility that our planned investment and operational initiatives will not result in the anticipated benefits to our business; the possibility that we will continue to experience decreases in our subscriber base; an adverse impact on our business from litigation or regulatory proceedings; an adverse impact on our business from our substantial indebtedness and the cost of servicing our debt; the rate of growth of the Small and Medium Business (“SMB”) market for our solutions; our inability to 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

 

4


Factors” in our Annual Report on Form 10-K for the period ended December 31, 2017 filed with the SEC on February 22, 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) (em)Powers millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, mobile business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, Domain.com and SiteBuilder, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,500 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

 

5


Endurance International Group Holdings, Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

 

     December 31,
2017
    March 31,
2018
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 66,493     $ 86,678  

Restricted cash

     2,625       1,772  

Accounts receivable

     15,945       13,493  

Prepaid domain name registry fees

     53,805       59,690  

Prepaid commissions

     —         42,746  

Prepaid expenses and other current assets

     29,327       30,653  
  

 

 

   

 

 

 

Total current assets

     168,195       235,032  

Property and equipment—net

     95,452       87,653  

Goodwill

     1,850,582       1,851,209  

Other intangible assets—net

     455,440       429,797  

Deferred financing costs

     3,189       2,732  

Investments

     15,267       15,241  

Prepaid domain name registry fees, net of current portion

     10,806       11,889  

Prepaid commissions, net of current portion

     —         41,164  

Other assets

     2,155       3,091  
  

 

 

   

 

 

 

Total assets

   $ 2,601,086     $ 2,677,808  
  

 

 

   

 

 

 

Liabilities, redeemable non-controlling interest and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 11,058     $ 19,118  

Accrued expenses

     79,991       81,065  

Accrued interest

     24,457       14,979  

Deferred revenue

     361,940       389,734  

Current portion of notes payable

     33,945       33,945  

Current portion of capital lease obligations

     7,630       7,281  

Deferred consideration—short term

     4,365       4,435  

Other current liabilities

     4,031       3,754  
  

 

 

   

 

 

 

Total current liabilities

     527,417       554,311  

Long-term deferred revenue

     90,972       96,718  

Notes payable—long term, net of original issue discounts of $25,811 and $24,752 and deferred financing costs of $37,736 and $36,299, respectively

     1,858,300       1,835,309  

Capital lease obligations—long term

     7,719       5,837  

Deferred tax liability

     19,696       27,679  

Deferred consideration—long term

     3,551       3,608  

Other liabilities

     10,426       10,157  
  

 

 

   

 

 

 

Total liabilities

     2,518,081       2,533,619  
  

 

 

   

 

 

 

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; 140,190,165 and 140,457,825 shares issued at December 31, 2017 and March 31, 2018, respectively; 140,190,695 and 140,457,825 outstanding at December 31, 2017 and March 31, 2018, respectively

     14       14  

Additional paid-in capital

     931,033       938,301  

Accumulated other comprehensive (loss) income

     (541     1,080  

Accumulated deficit

     (847,501     (795,206
  

 

 

   

 

 

 

Total stockholders’ equity

     83,005       144,189  
  

 

 

   

 

 

 

Total liabilities, redeemable non-controlling interest and stockholders’ equity

   $ 2,601,086     $ 2,677,808  
  

 

 

   

 

 

 

 

6


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
March 31,
 
     2017     2018  

Revenue

   $ 295,137     $ 291,356  

Cost of revenue

     148,749       133,906  
  

 

 

   

 

 

 

Gross profit

     146,388       157,450  
  

 

 

   

 

 

 

Operating expense:

    

Sales and marketing

     72,772       67,356  

Engineering and development

     20,362       19,917  

General and administrative

     39,080       38,775  

Transaction expenses

     580       —    
  

 

 

   

 

 

 

Total operating expense

     132,794       126,048  
  

 

 

   

 

 

 

Income from operations

     13,594       31,402  
  

 

 

   

 

 

 

Other income (expense):

    

Interest income

     118       204  

Interest expense

     (39,516     (36,050
  

 

 

   

 

 

 

Total other expense—net

     (39,398     (35,846
  

 

 

   

 

 

 

(Loss) income before income taxes and equity earnings of unconsolidated entities

     (25,804     (4,444

Income tax expense

     5,774       2,617  
  

 

 

   

 

 

 

(Loss) income before equity earnings of unconsolidated entities

     (31,578     (7,061

Equity loss of unconsolidated entities, net of tax

     —         27  
  

 

 

   

 

 

 

Net (loss) income

   $ (31,578   $ (7,088
  

 

 

   

 

 

 

Net loss attributable to non-controlling interest

     226       —    

Excess accretion of non-controlling interest

     3,584       —    
  

 

 

   

 

 

 

Total net loss attributable to non-controlling interest

     3,810       —    
  

 

 

   

 

 

 

Net (loss) income attributable to Endurance International Group Holdings, Inc.

   $ (35,388   $ (7,088
  

 

 

   

 

 

 

Comprehensive income (loss):

    

Foreign currency translation adjustments

     686       580  

Unrealized (loss) gain on cash flow hedge, net of taxes of $38 and ($325) for the three months ended March 31, 2017 and 2018, respectively

     (216     1,041  
  

 

 

   

 

 

 

Total comprehensive (loss) income

   $ (34,918   $ (5,467
  

 

 

   

 

 

 

Basic net (loss) income per share attributable to Endurance International Group Holdings, Inc.

   $ (0.26   $ (0.05
  

 

 

   

 

 

 

Diluted net (loss) income per share attributable to Endurance International Group Holdings, Inc.

   $ (0.26   $ (0.05
  

 

 

   

 

 

 

Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.:

    
  

 

 

   

 

 

 

Basic

     134,935,153       140,457,487  
  

 

 

   

 

 

 

Diluted

     134,935,153       140,457,487  
  

 

 

   

 

 

 

 

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Endurance International Group Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2017     2018  

Cash flows from operating activities:

    

Net (loss) income

   $ (31,578   $ (7,088

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation of property and equipment

     13,111       12,068  

Amortization of other intangible assets

     34,267       25,735  

Amortization of deferred financing costs

     1,744       1,894  

Amortization of net present value of deferred consideration

     190       128  

Amortization of original issue discounts

     846       1,058  

Stock-based compensation

     12,924       6,992  

Deferred tax (benefit) expense

     3,440       492  

Loss (gain) on sale of assets

     (225     48  

Loss (gain) from unconsolidated entities

     —         27  

Changes in operating assets and liabilities, net of acquisitions:

    

Accounts receivable

     2,392       2,448  

Prepaid expenses and other current assets

     (5,717     (2,697

Accounts payable and accrued expenses

     (13,467     595  

Deferred revenue

     15,747       10,660  
  

 

 

   

 

 

 

Net cash provided by operating activities

     33,674       52,360  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (9,258     (5,254

Proceeds from sale of assets

     251       —    

Purchases of intangible assets

     (33     —    
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (9,040     (5,254
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of term loans

     (8,925     (25,486

Payment of financing costs

     (92     —    

Payment of deferred consideration

     (818     —    

Principal payments on capital lease obligations

     (2,037     (2,230

Proceeds from exercise of stock options

     628       25  
  

 

 

   

 

 

 

Net cash used in financing activities

     (11,244     (27,691
  

 

 

   

 

 

 

Net effect of exchange rate on cash and cash equivalents and restricted cash

     2,327       (83
  

 

 

   

 

 

 

Net increase in cash and cash equivalents and restricted cash

     15,717       19,332  

Cash and cash equivalents and restricted cash:

    

Beginning of period

     56,898       69,118  
  

 

 

   

 

 

 

End of period

   $ 72,615     $ 88,450  
  

 

 

   

 

 

 

Supplemental cash flow information:

    

Interest paid

   $ 46,546     $ 42,091  

Income taxes paid

   $ 952     $ 603  

 

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GAAP to Non-GAAP Reconciliation—Adjusted EBITDA

The following table presents a reconciliation of net income (loss) calculated in accordance with GAAP to adjusted EBITDA (all data in thousands):

 

     Three Months Ended
March 31,
 
     2017     2018  

Net (loss) income

   $ (31,578   $ (7,088

Interest expense, net(1)

     39,398       35,846  

Income tax expense (benefit)

     5,774       2,617  

Depreciation

     13,111       12,068  

Amortization of other intangible assets

     34,267       25,735  

Stock-based compensation

     12,924       6,992  

Restructuring expenses

     5,627       1,529  

Transaction expenses and charges

     580       —    

Loss of unconsolidated entities

     —         27  

Impairment of other long-lived assets

     —         —    

Shareholder litigation reserve

     —         8,500  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 80,103     $ 86,226  
  

 

 

   

 

 

 

 

(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
March 31,
 
     2017     2018  

Cash flow from operations

   $ 33,674     $ 52,360  

Less:

    

Capital expenditures and capital lease obligations(1)

     (11,295     (7,484
  

 

 

   

 

 

 

Free cash flow

   $ 22,379     $ 44,876  
  

 

 

   

 

 

 

 

(1) Capital expenditures during the three months ended March 31, 2017 and 2018 includes $2.0 million and $2.2 million, respectively, of principal payments under a three year capital lease for software. The remaining balance on the capital lease is $13.1 million as of March 31, 2018.

 

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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
March 31,
 
     2017      2018  

Consolidated revenue

   $ 295,137      $ 291,356  

Consolidated total subscribers

     5,304        5,011  

Consolidated average subscribers for the period

     5,338        5,031  

Consolidated ARPS

   $ 18.43      $ 19.30  

Web presence revenue

   $ 164,009      $ 155,017  

Web presence subscribers

     4,135        3,811  

Web presence average subscribers for the period

     4,167        3,829  

Web presence ARPS

   $ 13.12      $ 13.49  

Email marketing revenue

   $ 97,789      $ 102,447  

Email marketing subscribers

     537        518  

Email marketing average subscribers for the period

     541        519  

Email marketing ARPS

   $ 60.31      $ 65.83  

Domain revenue

   $ 33,339      $ 33,892  

Domain subscribers

     632        682  

Domain average subscribers for the period

     630        683  

Domain ARPS

   $ 17.63      $ 16.54  

 

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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
March 31, 2017
 
     Web
presence
    Email
marketing
    Domain     Total  
     Revised(2)  

Revenue

   $ 164,009     $ 97,789     $ 33,339     $ 295,137  

Gross profit

   $ 77,870     $ 59,772     $ 8,746     $ 146,388  

Net (loss) income

   $ (19,018   $ (7,952   $ (4,608   $ (31,578

Interest expense, net(1)

     16,390       22,519       489       39,398  

Income tax expense (benefit)

     8,493       (4,777     2,058       5,774  

Depreciation

     8,419       3,873       819       13,111  

Amortization of other intangible assets

     14,551       18,362       1,354       34,267  

Stock-based compensation

     9,790       1,824       1,310       12,924  

Restructuring expenses

     2,128       3,292       207       5,627  

Transaction expenses and charges

     —         580       —         580  

(Gain) loss of unconsolidated entities

     —         —         —         —    

Impairment of other long-lived assets

     —         —         —         —    

Shareholder litigation reserve

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 40,753     $ 37,721     $ 1,629     $ 80,103  
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended
March 31, 2018
 
     Web
presence
    Email
marketing
    Domain     Total  

Revenue

   $ 155,017     $ 102,447     $ 33,892     $ 291,356  

Gross profit

   $ 74,373     $ 72,177     $ 10,900     $ 157,450  

Net (loss) income

   $ (17,108   $ 15,129     $ (5,109   $ (7,088

Interest expense, net(1)

     16,986       16,409       2,451       35,846  

Income tax expense (benefit)

     6,321       (5,607     1,903       2,617  

Depreciation

     7,977       3,146       945       12,068  

Amortization of other intangible assets

     12,008       13,093       634       25,735  

Stock-based compensation

     5,073       1,408       511       6,992  

Restructuring expenses

     812       162       555       1,529  

Transaction expenses and charges

     —         —         —         —    

Loss of unconsolidated entities

     27       —         —         27  

Impairment of other long-lived assets

     —         —         —         —    

Shareholder litigation reserve

     5,745       1,500       1,255       8,500  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 37,841     $ 45,240     $ 3,145     $ 86,226  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income.
(2) We have revised the allocation for our 2016 and 2017 full year and 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 $1.1 million for the period ending March 31, 2017. Consolidated adjusted EBITDA figures for these periods were not affected by this correction.

 

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GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of May 1, 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

   $ (19.5   $ (4.5

Estimated interest expense (net)

             135               135  

Estimated income tax expense (benefit)

     4       4  

Estimated depreciation

     50       52  

Estimated amortization of acquired intangible assets

     100       100  

Estimated stock-based compensation

     30       32  

Estimated restructuring expenses

     2       3  

Estimated transaction expenses and charges

     —         —    

Estimated (gain) loss of unconsolidated entities

     —         —    

Estimated impairment of other long-lived assets

     —         —    

Estimated shareholder litigation reserve

     8.5       8.5  
  

 

 

   

 

 

 

Adjusted EBITDA guidance

   $ 310     $ 330  

GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of May 1, 2018)—Free Cash Flow

The following table reflects the reconciliation of fiscal year 2018 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2018 guidance for free cash flow. All figures shown are approximate.

 

($ in millions)    Twelve Months
Ending
December 31, 2018
 

Estimated cash flow from operations

   $ 178  

Estimated capital expenditures and capital lease obligations

     (58
  

 

 

 

Free cash flow guidance

   $ 120  

 

12