Endurance International Group Reports 2020 First Quarter Results
- GAAP revenue of
$272.2 million - Net loss of
$2.2 million - Adjusted EBITDA of
$72.5 million - Cash flow from operations of
$34.9 million - Free cash flow of
$23.7 million - Total subscribers on platform were approximately 4.780 million at
March 31, 2020
“Our first quarter results reflect continued progress operationally and financially across our scale strategic platform. Our focused investment in our strategic brands has resulted in positive subscriber growth for our third consecutive quarter, adjusted for the sale of SinglePlatform,” commented
First Quarter 2020 Financial Highlights
As previously disclosed, the Company completed the sale of SinglePlatform on
- Revenue for the first quarter of 2020 was
$272.2 million , a decrease of 1 percent compared to revenue of$273.7 million in the first quarter of 2019, excluding SinglePlatform. Revenue in the first quarter of 2019 was$280.7 million , including the contribution of approximately$7.0 million from SinglePlatform. - Net loss for the first quarter of 2020 was
$2.2 million , or$(0.02) per diluted share, compared to net loss of$3.5 million , or$(0.02) per diluted share, for the first quarter of 2019. - Adjusted EBITDA for the first quarter of 2020 was
$72.5 million , a decrease of 6 percent compared to first quarter 2019 adjusted EBITDA of$76.9 million , excluding SinglePlatform. Adjusted EBITDA in the first quarter of 2019 was$78.5 million , including the contribution of approximately$1.6 million from SinglePlatform. - Cash flow from operations for the first quarter of 2020 was
$34.9 million , an increase of 132 percent compared to$15.0 million for the first quarter of 2019. - Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment obligations, for the first quarter of 2020 was
$23.7 million , an increase of 236 percent compared to$7.1 million for the first quarter of 2019. - Under its previously announced authorization, during the quarter the Company repurchased 7,603,620 shares for a total of
$12.3 million , at an average price per share of$1.62 . Year to date the Company repurchased 8,708,720 shares for a total of$14.4 million , at an average price per share of$1.66 .
First Quarter 2020 Operating Highlights
- Total subscribers on platform at
March 31, 2020 were approximately 4.780 million, compared to approximately 4.783 million subscribers atMarch 31, 2019 and approximately 4.766 million subscribers atDecember 31, 2019 . See “Total Subscribers” below. - Average revenue per subscriber, or ARPS, for the first quarter of 2020 was
$19.01 , compared to$19.52 for the first quarter 2019 and$19.34 for the fourth quarter of 2019. See “Average Revenue Per Subscriber” below.
Update on Outlook
Given the uncertainty regarding the COVID-19 pandemic and the related economic impact, the Company is suspending the guidance previously issued on
Conference Call and Webcast Information
Endurance International Group’s first quarter 2020 financial results teleconference and webcast is scheduled to begin at
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. In this press release, we are also presenting the following additional non-GAAP financial measures for the first quarter of 2019: revenue - excluding SinglePlatform and adjusted EBITDA - excluding SinglePlatform. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP or includes amounts that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. For example, adjusted EBITDA excludes interest expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business. The presentation of non-GAAP financial information is not meant to be considered in isolation from, or as a substitute for, the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the additional information about adjusted EBITDA and free cash flow shown below, including the reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Revenue - excluding SinglePlatform is a non-GAAP financial measure that we calculate as revenue excluding revenue contributed by our SinglePlatform business, which we sold on
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, gain on sale of business, (gain) loss of unconsolidated entities, impairment of goodwill and other longlived assets, and shareholder litigation reserve. We view adjusted EBITDA as a performance measure and believe it helps investors evaluate and compare our core operating performance from period to period.
Adjusted EBITDA - excluding SinglePlatform is a non-GAAP financial measure that we calculate as adjusted EBITDA less adjusted EBITDA contributed by our SinglePlatform business, which we sold on
Free Cash Flow, or FCF, is a non-GAAP financial measure that we calculate as cash flow from operations less capital expenditures and financed equipment. We believe that FCF provides investors with an indicator of our ability to generate positive cash flows after meeting our obligations with regard to capital expenditures (including financed equipment).
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 first quarter of 2020, these adjustments had a negligible impact on 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 about the potential impact of the COVID-19 pandemic. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts, and statements identified by words such as “expects,” “believes,” “estimates,” “may,” “continue,” “positions,” “confident,” and variations of such words or words of similar meaning and the use of future dates. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that these plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: the possibility that the impact of the COVID-19 pandemic on the economy and our business will be different from or more extensive than we expect; the possibility that our planned investment initiatives will not result in the anticipated benefits to our business; the possibility that we will be unable to maintain subscriber growth; an adverse impact on our business from litigation or regulatory proceedings or commercial disputes; an adverse impact on our business from our substantial indebtedness and the cost of servicing our debt; the rate of growth of the Small and Medium Business (“SMB”) market for our solutions or the impact of COVID-19 on that market; our inability increase sales to our existing subscribers or retain our existing subscribers; system or Internet failures; our inability to maintain or improve our competitive position or market share; and other risks and uncertainties discussed in our filings with the
About
Investor Contact:
(781) 852-3450
ir@endurance.com
Press Contact:
(781) 418-6716
press@endurance.com
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
2019 |
2020 |
||||||||||
| Assets | (unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 111,265 | $ | 111,808 | |||||||
| Restricted cash | 1,732 | 1,731 | |||||||||
| Accounts receivable | 10,224 | 10,631 | |||||||||
| Prepaid domain name registry fees | 55,237 | 56,584 | |||||||||
| Prepaid commissions | 38,435 | 38,421 | |||||||||
| Prepaid and refundable taxes | 6,810 | 5,247 | |||||||||
| Prepaid expenses and other current assets | 23,883 | 30,842 | |||||||||
| Total current assets | 247,586 | 255,264 | |||||||||
| Property and equipment—net | 85,925 | 92,184 | |||||||||
| Operating lease right-of-use assets | 90,519 | 84,878 | |||||||||
| 1,835,310 | 1,834,329 | ||||||||||
| Other intangible assets—net | 245,002 | 227,670 | |||||||||
| Deferred financing costs—net | 1,778 | 1,559 | |||||||||
| Investments | 15,000 | 15,000 | |||||||||
| Prepaid domain name registry fees, net of current portion | 11,107 | 11,536 | |||||||||
| Prepaid commissions, net of current portion | 48,780 | 52,050 | |||||||||
| Deferred tax asset | 64 | 123 | |||||||||
| Other assets | 3,015 | 3,258 | |||||||||
| Total assets | $ | 2,584,086 | $ | 2,577,851 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 10,054 | $ | 14,679 | |||||||
| Accrued expenses | 64,560 | 66,338 | |||||||||
| Accrued taxes | 251 | 471 | |||||||||
| Accrued interest | 23,434 | 13,243 | |||||||||
| Deferred revenue | 369,475 | 377,518 | |||||||||
| Operating lease liabilities—short term | 21,193 | 20,309 | |||||||||
| Current portion of notes payable | 31,606 | 31,606 | |||||||||
| Current portion of financed equipment | 790 | 6,081 | |||||||||
| Deferred consideration—short term | 2,201 | 2,225 | |||||||||
| Other current liabilities | 2,165 | 2,588 | |||||||||
| Total current liabilities | 525,729 | 535,058 | |||||||||
| Long-term deferred revenue | 99,652 | 102,092 | |||||||||
| Operating lease liabilities—long term | 78,151 | 73,340 | |||||||||
| Notes payable—long term, net of original issue discounts of |
1,649,867 | 1,641,938 | |||||||||
| Financed equipment—long term | — | 597 | |||||||||
| Deferred tax liability | 27,097 | 25,799 | |||||||||
| Other liabilities | 6,636 | 6,982 | |||||||||
| Total liabilities | 2,387,132 | 2,385,806 | |||||||||
| Stockholders’ equity: | |||||||||||
| Preferred Stock—par value |
— | — | |||||||||
| Common Stock—par value |
15 | 15 | |||||||||
| Additional paid-in capital | 996,958 | 1,006,807 | |||||||||
| — | (12,329 | ) | |||||||||
| Accumulated other comprehensive loss | (4,088 | ) | (4,273 | ) | |||||||
| Accumulated deficit | (795,931 | ) | (798,175 | ) | |||||||
| Total stockholders’ equity | 196,954 | 192,045 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,584,086 | $ | 2,577,851 | |||||||
Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)
(in thousands, except share and per share amounts)
| Three Months Ended |
|||||||||||||||
| 2019 | 2020 | ||||||||||||||
| Revenue | $ | 280,683 | $ | 272,194 | |||||||||||
| Cost of revenue | 123,854 | 116,264 | |||||||||||||
| Gross profit | 156,829 | 155,930 | |||||||||||||
| Operating expense: | |||||||||||||||
| Sales and marketing | 66,588 | 67,191 | |||||||||||||
| Engineering and development | 23,694 | 26,874 | |||||||||||||
| General and administrative | 31,393 | 30,876 | |||||||||||||
| Total operating expense | 121,675 | 124,941 | |||||||||||||
| Income from operations | 35,154 | 30,989 | |||||||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 291 | 170 | |||||||||||||
| Interest expense | (37,214 | ) | (32,734 | ) | |||||||||||
| Total other expense—net | (36,923 | ) | (32,564 | ) | |||||||||||
| Loss before income taxes and equity earnings of unconsolidated entities | (1,769 | ) | (1,575 | ) | |||||||||||
| Income tax expense | 1,719 | 669 | |||||||||||||
| Net loss | $ | (3,488 | ) | $ | (2,244 | ) | |||||||||
| Comprehensive (loss) income: | |||||||||||||||
| Foreign currency translation adjustments | (401 | ) | (557 | ) | |||||||||||
| Unrealized (loss) gain on cash flow hedge, net of tax benefit (expense) of |
(961 | ) | 372 | ||||||||||||
| Total comprehensive loss | $ | (4,850 | ) | $ | (2,429 | ) | |||||||||
| Basic net loss per share | $ | (0.02 | ) | $ | (0.02 | ) | |||||||||
| Diluted net loss per share | $ | (0.02 | ) | $ | (0.02 | ) | |||||||||
| Weighted-average common shares used in computing net loss per share: | |||||||||||||||
| Basic | 143,512,293 | 146,027,241 | |||||||||||||
| Diluted | 143,512,293 | 146,027,241 | |||||||||||||
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
| Three Months Ended |
|||||||||||||||
| 2019 | 2020 | ||||||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net loss | $ | (3,488 | ) | $ | (2,244 | ) | |||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||
| Depreciation of property and equipment | 11,206 | 12,696 | |||||||||||||
| Amortization of other intangible assets | 21,120 | 17,311 | |||||||||||||
| Amortization of deferred financing costs | 1,733 | 1,853 | |||||||||||||
| Amortization of net present value of deferred consideration | 61 | 24 | |||||||||||||
| Amortization of original issue discounts | 1,087 | 1,184 | |||||||||||||
| Stock-based compensation | 9,016 | 9,836 | |||||||||||||
| Deferred tax expense | (906 | ) | (1,478 | ) | |||||||||||
| Loss on sale of assets | 26 | — | |||||||||||||
| Gain on early extinguishment of debt | — | (11 | ) | ||||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||||||
| Accounts receivable | (1,383 | ) | (696 | ) | |||||||||||
| Prepaid and refundable taxes | (591 | ) | 1,359 | ||||||||||||
| Prepaid expenses and other current assets | (2,292 | ) | (12,997 | ) | |||||||||||
| Leases right-of-use asset, net | 573 | (37 | ) | ||||||||||||
| Accounts payable and accrued expenses | (31,512 | ) | (4,869 | ) | |||||||||||
| Deferred revenue | 10,399 | 12,979 | |||||||||||||
| Net cash provided by operating activities | 15,049 | 34,910 | |||||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Purchases of property and equipment | (5,423 | ) | (9,916 | ) | |||||||||||
| Net cash used in investing activities | (5,423 | ) | (9,916 | ) | |||||||||||
| Cash flows from financing activities: | |||||||||||||||
| Repayments of term loans | (25,000 | ) | (7,902 | ) | |||||||||||
| Repayments of senior notes | — | (2,836 | ) | ||||||||||||
| Purchase of treasury stock | — | (11,636 | ) | ||||||||||||
| Principal payments on financed equipment | (2,570 | ) | (1,254 | ) | |||||||||||
| Proceeds from exercise of stock options | 5 | 13 | |||||||||||||
| Net cash used in financing activities | (27,565 | ) | (23,615 | ) | |||||||||||
| Net effect of exchange rate on cash and cash equivalents and restricted cash | (622 | ) | (837 | ) | |||||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | (18,561 | ) | 542 | ||||||||||||
| Cash and cash equivalents and restricted cash: | |||||||||||||||
| Beginning of period | 90,576 | 112,997 | |||||||||||||
| End of period | $ | 72,015 | $ | 113,539 | |||||||||||
| Supplemental cash flow information: | |||||||||||||||
| Interest paid | $ | 44,259 | $ | 39,434 | |||||||||||
| Income taxes paid (refunded) | $ | 1,866 | $ | (21 | ) | ||||||||||
| Assets acquired under equipment financing | $ | — | $ | 7,704 | |||||||||||
GAAP to Non-GAAP Reconciliation - Adjusted EBITDA
The following table presents a reconciliation of net (loss) income calculated in accordance with GAAP to adjusted EBITDA (all data in thousands):
| Three Months Ended |
|||||||||||||||
| 2019 | 2020 | ||||||||||||||
| Net (loss) income | $ | (3,488 | ) | $ | (2,244 | ) | |||||||||
| Interest expense, net(1) | 36,923 | 32,564 | |||||||||||||
| Income tax expense | 1,719 | 669 | |||||||||||||
| Depreciation | 11,206 | 12,696 | |||||||||||||
| Amortization of other intangible assets | 21,120 | 17,311 | |||||||||||||
| Stock-based compensation | 9,016 | 9,836 | |||||||||||||
| Restructuring expenses | 2,015 | 1,682 | |||||||||||||
| Adjusted EBITDA | $ | 78,511 | $ | 72,514 | |||||||||||
(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 |
|||||||||
| 2019 |
2020 |
||||||||
| Cash flows from operations | $ | 15,049 | $ | 34,910 | |||||
| Less: | |||||||||
| Capital expenditures and financed equipment obligations(1) | (7,993) | (11,170) | |||||||
| Free cash flow | $ | 7,056 | $ | 23,740 | |||||
(1) Capital expenditures during the three months ended
Average Revenue Per Subscriber - Calculation and Segment Detail
From fiscal year 2017 through fiscal year 2019, we reported our financial results in three reportable segments. In the second half of 2019, we started the process of simplifying our organization to support our two key strategic platforms, web presence (including our web hosting and domain offerings) and email marketing. During the three months ended
- Web presence. The web presence segment consists of our web hosting brands, including Bluehost and HostGator, as well as our domain-focused brands such as Domain.com, ResellerClub and LogicBoxes. This segment includes web hosting, website security, website design tools and services, e-commerce products, domain names and domain privacy. It also includes the sale of domain management services to resellers and end users, as well as premium domain names, and generates advertising revenue from domain name parking. The results presented below for the web presence segment include the former domain segment.
- Digital marketing. The digital marketing segment consists of Constant Contact email marketing tools and related products. This segment also generates revenue from sales of our Constant Contact-branded website builder tool and our Ecomdash inventory management and marketplace listing solution. For most of 2019, the digital marketing segment also included the SinglePlatform digital storefront business, which was sold on
December 5, 2019 .
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 |
|||||||||||||||
| 2019 | 2020 | ||||||||||||||
| Consolidated revenue | $ | 280,683 | $ | 272,194 | |||||||||||
| Consolidated total subscribers | 4,783 | 4,780 | |||||||||||||
| Consolidated average subscribers for the period | 4,793 | 4,773 | |||||||||||||
| Consolidated ARPS | $ | 19.52 | $ | 19.01 | |||||||||||
| Web presence revenue | $ | 177,943 | $ | 174,290 | |||||||||||
| Web presence subscribers | 4,288 | 4,309 | |||||||||||||
| Web presence average subscribers for the period | 4,297 | 4,303 | |||||||||||||
| Web presence ARPS | $ | 13.80 | $ | 13.50 | |||||||||||
| Digital marketing revenue | $ | 102,740 | $ | 97,904 | |||||||||||
| Digital marketing subscribers | 495 | 471 | |||||||||||||
| Digital marketing average subscribers for the period | 496 | 470 | |||||||||||||
| Digital marketing ARPS | $ | 69.11 | $ | 69.50 | |||||||||||
The following table presents revenue, gross profit, and a reconciliation by segment of net (loss) income calculated in accordance with GAAP to adjusted EBITDA (all data in thousands):
| Three Months Ended |
||||||||||||||||||||||||||
| Web presence | Digital marketing | Total | ||||||||||||||||||||||||
| Revenue | $ | 177,943 | $ | 102,740 | $ | 280,683 | ||||||||||||||||||||
| Gross profit | $ | 82,782 | $ | 74,047 | $ | 156,829 | ||||||||||||||||||||
| Net (loss) income | $ | (9,426 | ) | $ | 5,938 | $ | (3,488 | ) | ||||||||||||||||||
| Interest expense, net(1) | 19,529 | 17,394 | 36,923 | |||||||||||||||||||||||
| Income tax expense | 1,091 | 628 | 1,719 | |||||||||||||||||||||||
| Depreciation | 8,882 | 2,324 | 11,206 | |||||||||||||||||||||||
| Amortization of other intangible assets | 9,837 | 11,283 | 21,120 | |||||||||||||||||||||||
| Stock-based compensation | 5,933 | 3,083 | 9,016 | |||||||||||||||||||||||
| Restructuring expenses | 661 | 1,354 | 2,015 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 36,507 | $ | 42,004 | $ | 78,511 | * | |||||||||||||||||||
| Three Months Ended |
||||||||||||||||||||||||||
| Web presence | Digital marketing | Total | ||||||||||||||||||||||||
| Revenue | $ | 174,290 | $ | 97,904 | $ | 272,194 | ||||||||||||||||||||
| Gross profit | $ | 84,142 | $ | 71,788 | $ | 155,930 | ||||||||||||||||||||
| Net (loss) income | $ | (7,234 | ) | $ | 4,990 | $ | (2,244 | ) | ||||||||||||||||||
| Interest expense, net(1) | 15,604 | 16,960 | 32,564 | |||||||||||||||||||||||
| Income tax expense | 428 | 241 | 669 | |||||||||||||||||||||||
| Depreciation | 10,423 | 2,273 | 12,696 | |||||||||||||||||||||||
| Amortization of other intangible assets | 7,590 | 9,721 | 17,311 | |||||||||||||||||||||||
| Stock-based compensation | 6,590 | 3,246 | 9,836 | |||||||||||||||||||||||
| Restructuring expenses | 1,032 | 650 | 1,682 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 34,433 | $ | 38,081 | $ | 72,514 | ||||||||||||||||||||
(1) Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income.
* Excluding SinglePlatform, which contributed approximately
Source: Endurance International Group Holdings, Inc.