Form 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): April 29, 2019

 

 

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 April 30, 2019, Endurance International Group Holdings, Inc. (the “Company”) issued a press release announcing certain financial results and other information for the quarter ended March 31, 2019. 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 reported under Item 2.02 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 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Election of Director

On April 29, 2019, the Board of Directors (the “Board”) of the Company, acting on the recommendation of the Nominating and Corporate Governance Committee of the Board, elected Alexi A. Wellman to the Board. Ms. Wellman was also appointed to serve as a member of the Audit Committee.

Ms. Wellman brings extensive executive leadership experience and expertise in finance and accounting. Ms. Wellman is currently the Chief Financial and Accounting Officer at Altaba Inc., a publicly traded management investment company. Prior to that role, Ms. Wellman was the Vice President, Global Controller of Yahoo from October 2015 to June 2017, and the Vice President, Finance at Yahoo from November 2013 to October 2015. Prior to that, Ms. Wellman served as Chief Financial Officer of Nebraska Book Company, Inc. from December 2011 to June 2013. In addition, from October 2004 to December 2011, Ms. Wellman served as a Partner at KPMG LLP.

Ms. Wellman fills the vacancy created by the resignation of Michael Hayford. As previously announced in the Company’s definitive proxy statement for the 2019 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission on April 11, 2019, Mr. Hayford’s resignation became effective on April 29, 2019.

In connection with her appointment to the Board, Ms. Wellman received a grant of 31,897 shares of restricted stock units pursuant to the Company’s Amended and Restated 2013 Stock Incentive Plan. The shares underlying this award will vest on the first anniversary of the grant date. Ms. Wellman also entered into the Company’s standard form of indemnification agreement.

 

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 April 30, 2019


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: April 30, 2019      
   

/s/ Marc Montagner

    (Signature)
    Name:   Marc Montagner
    Title:   Chief Financial Officer
EX-99.1

Exhibit 99.1

 

LOGO

Endurance International Group Reports 2019 First Quarter Results

 

   

GAAP revenue of $280.7 million

 

   

Net loss of $3.5 million

 

   

Adjusted EBITDA of $78.5 million

 

   

Cash flow from operations of $15.0 million

 

   

Free cash flow of $7.1 million

 

   

Total subscribers on platform were approximately 4.783 million at March 31, 2019

BURLINGTON, MA (April 30, 2019) — 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, 2019.

“We are pleased with our operational execution in the first quarter and our results reflect continued progress positioning our multi-brand platform for a return to growth,” commented Jeffrey H. Fox, president and chief executive officer of Endurance International Group. “Our 2019 plan to continue simplifying operations and investing to deliver increased value to customers of our key strategic brands is progressing. We continue to anticipate a transition back to revenue growth in the second half of 2019 with adjustments to our guidance that better reflect the timing of our progress.”

First Quarter 2019 Financial Highlights

 

 

Revenue for the first quarter of 2019 was $280.7 million, a decrease of 3.7 percent compared to $291.4 million for the first quarter of 2018.

 

 

Net loss for the first quarter of 2019 was $3.5 million, or $(0.02) per diluted share, compared to net loss of $2.5 million, or $(0.02) per diluted share, for the first quarter of 2018.

 

 

Adjusted EBITDA for the first quarter of 2019 was $78.5 million, a decrease of 8.9 percent compared to $86.2 million for the first quarter of 2018.

 

 

Cash flow from operations for the first quarter of 2019 was $15.0 million, a decrease of 71.3 percent compared to $52.4 million for the first quarter of 2018.

 

 

Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment obligations, for the first quarter of 2019 was $7.1 million, a decrease of 84.3 percent compared to $44.9 million for the first quarter of 2018.


First Quarter Operating Highlights

 

 

Total subscribers on platform at March 31, 2019 were approximately 4.783 million, compared to approximately 5.011 million subscribers at March 31, 2018 and approximately 4.802 million subscribers at December 31, 2018. See “Total Subscribers” below.

 

 

Average revenue per subscriber, or ARPS, for the first quarter of 2019 was $19.52, compared to $19.30 for the first quarter of 2018 and $19.50 for the fourth quarter of 2018. See “Average Revenue Per Subscriber” below.

Fiscal 2019 Guidance

The Company is updating its guidance for the full year ending December 31, 2019. As of the date of this release, April 30, 2019, the Company expects:

 

     2018 Actual
as Reported
     Prior Guidance      Revised Guidance
(as of April 30, 2019)
 

GAAP revenue

   $ 1.145 billion      $ 1.140 to $1.160 billion      $ 1.120 to $1.140 billion  

Adjusted EBITDA

   $ 338 million      $ 310 to $330 million      $ 300 to $320 million  

Free cash flow

   $ 129 million      $ 115 to $125 million      $ 110 to $120 million  

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

As originally disclosed in third quarter of 2018, the Company 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 did not impact the previously reported figures for Adjusted EBITDA, Cash Flow from Operations or Free Cash Flow.

Conference Call and Webcast Information

Endurance International Group’s first quarter 2019 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EDT on Tuesday, April 30, 2019. 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

 

2


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, 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 financed equipment 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 financed equipment 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 first quarter of 2019, these adjustments had a net negative impact of approximately 2,000 subscribers on our total subscriber count.

 

3


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 updated financial guidance and plan for fiscal year 2019, our expectation that we will transition back to revenue growth in the second half of 2019, the expected outcome of our investment and operational plans, including our focus on simplifying our business and delivering increased customer value, 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,” “anticipates,” “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 or our actual financial results may differ from expectations; the possibility that we may not be able to execute our updated 2019 plan or 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 Annual Report on Form 10-K for the period ended December 31, 2018 filed with the SEC on February 21, 2019 and other reports we file with the SEC.

 

4


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

 

5


Endurance International Group Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

     December 31,
2018
    March 31, 2019  
           (unaudited)  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 88,644     $ 70,084  

Restricted cash

     1,932       1,931  

Accounts receivable

     12,205       13,556  

Prepaid domain name registry fees

     56,779       59,193  

Prepaid commissions

     41,458       41,686  

Prepaid and refundable taxes

     7,235       7,826  

Prepaid expenses and other current assets

     27,855       29,557  
  

 

 

   

 

 

 

Total current assets

     236,108       223,833  

Property and equipment—net

     92,275       87,119  

Operating lease right-of-use assets

     —         109,302  

Goodwill

     1,849,065       1,848,602  

Other intangible assets—net

     352,516       331,409  

Deferred financing costs—net

     2,656       2,441  

Investments

     15,000       15,000  

Prepaid domain name registry fees, net of current portion

     11,207       11,412  

Prepaid commissions, net of current portion

     42,472       44,780  

Other assets

     5,208       2,872  
  

 

 

   

 

 

 

Total assets

   $ 2,606,507     $ 2,676,770  
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 12,449     $ 9,783  

Accrued expenses

     79,279       61,151  

Accrued taxes

     2,498       3,982  

Accrued interest

     25,259       15,018  

Deferred revenue

     371,758       379,181  

Operating lease liabilities—short term

     —         22,250  

Current portion of notes payable

     31,606       31,606  

Current portion of financed equipment

     8,379       6,502  

Deferred consideration—short term

     2,425       2,464  

Other current liabilities

     3,147       2,408  
  

 

 

   

 

 

 

Total current liabilities

     536,800       534,345  

Long-term deferred revenue

     96,140       99,037  

Operating lease liabilities—long term

     —         96,469  

Notes payable—long term, net of original issue discounts of $21,349 and $20,263 and deferred financing costs of $31,992 and $30,474, respectively

     1,770,055       1,747,659  

Deferred tax liability

     16,457       15,228  

Deferred consideration—long term

     1,364       1,386  

Other liabilities

     11,237       4,021  
  

 

 

   

 

 

 

Total liabilities

     2,432,053       2,498,145  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Preferred Stock—par value $0.0001; 5,000,000 shares authorized; no shares issued or outstanding

     —         —    

Common Stock—par value $0.0001; 500,000,000 shares authorized; 143,444,515 and 143,561,595 shares issued at December 31, 2018 and March 31, 2019, respectively; 143,444,178 and 143,561,595 outstanding at December 31, 2018 and March 31, 2019, respectively

     14       14  

Additional paid-in capital

     961,235       970,256  

Accumulated other comprehensive loss

     (3,211     (4,573

Accumulated deficit

     (783,584     (787,072
  

 

 

   

 

 

 

Total stockholders’ equity

     174,454       178,625  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,606,507     $ 2,676,770  
  

 

 

   

 

 

 

 

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,  
     2018     2019  

Revenue

   $ 291,356     $ 280,683  

Cost of revenue

     133,906       123,854  
  

 

 

   

 

 

 

Gross profit

     157,450       156,829  
  

 

 

   

 

 

 

Operating expense:

    

Sales and marketing

     67,356       66,588  

Engineering and development

     19,917       23,694  

General and administrative

     38,775       31,393  
  

 

 

   

 

 

 

Total operating expense

     126,048       121,675  
  

 

 

   

 

 

 

Income from operations

     31,402       35,154  
  

 

 

   

 

 

 

Other income (expense):

    

Interest income

     204       291  

Interest expense

     (36,050     (37,214
  

 

 

   

 

 

 

Total other expense—net

     (35,846     (36,923
  

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (4,444     (1,769

Income tax (benefit) expense

     (1,943     1,719  
  

 

 

   

 

 

 

Loss before equity earnings of unconsolidated entities

     (2,501     (3,488

Equity loss of unconsolidated entities, net of tax

     27       —    
  

 

 

   

 

 

 

Net loss

   $ (2,528   $ (3,488
  

 

 

   

 

 

 

Comprehensive income (loss):

    

Foreign currency translation adjustments

     580       (401

Unrealized gain (loss) on cash flow hedge, net of taxes of ($325) and $304 for the three months ended March 31, 2018 and 2019, respectively

     1,041       (961
  

 

 

   

 

 

 

Total comprehensive loss

   $ (907   $ (4,850
  

 

 

   

 

 

 

Basic and diluted net loss per share

   $ (0.02   $ (0.02
  

 

 

   

 

 

 

Weighted-average common shares used in computing net loss per share:

    
  

 

 

   

 

 

 

Basic and diluted

     140,361,982       143,512,293  
  

 

 

   

 

 

 

 

7


Endurance International Group Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

     Three Months Ended March 31,  
     2018     2019  

Cash flows from operating activities:

    

Net loss

   $ (2,528   $ (3,488

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

    

Depreciation of property and equipment

     12,068       11,206  

Amortization of other intangible assets

     25,735       21,120  

Amortization of deferred financing costs

     1,894       1,733  

Amortization of net present value of deferred consideration

     128       61  

Amortization of original issue discounts

     1,058       1,087  

Stock-based compensation

     6,992       9,016  

Deferred tax expense (benefit)

     (4,068     (906

Loss on sale of assets

     48       26  

Loss from unconsolidated entities

     27       —    

Changes in operating assets and liabilities, net of acquisitions:

    

Accounts receivable

     2,448       (1,383

Prepaid expenses and other current assets

     (2,811     (2,292

Prepaid and refundable taxes

     359       (591

Leases right-of-use asset, net

     —         573  

Accounts payable and accrued expenses

     350       (31,512

Deferred revenue

     10,660       10,399  
  

 

 

   

 

 

 

Net cash provided by operating activities

     52,360       15,049  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (5,254     (5,423
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,254     (5,423
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of term loans

     (25,486     (25,000

Principal payments on financed equipment

     (2,230     (2,570

Proceeds from exercise of stock options

     25       5  
  

 

 

   

 

 

 

Net cash used in financing activities

     (27,691     (27,565
  

 

 

   

 

 

 

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

     (83     (622
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents and restricted cash

     19,332       (18,561

Cash and cash equivalents and restricted cash:

    

Beginning of period

     69,118       90,576  
  

 

 

   

 

 

 

End of period

   $ 88,450     $ 72,015  
  

 

 

   

 

 

 

Supplemental cash flow information:

    

Interest paid

   $ 42,091     $ 44,259  

Income taxes paid

   $ 603     $ 1,866  

 

8


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 March 31,  
     2018      2019  

Net loss

   $ (2,528    $ (3,488

Interest expense, net(1)

     35,846        36,923  

Income tax (benefit) expense

     (1,943      1,719  

Depreciation

     12,068        11,206  

Amortization of other intangible assets

     25,735        21,120  

Stock-based compensation

     6,992        9,016  

Restructuring expenses

     1,529        2,015  

Loss from unconsolidated entities

     27        —    

Shareholder litigation reserve

     8,500        —    
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 86,226      $ 78,511  
  

 

 

    

 

 

 

 

(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,  
     2018      2019  

Cash flow from operations

   $ 52,360      $ 15,049  

Less:

     

Capital expenditures and financed equipment(1)

     (7,484      (7,993
  

 

 

    

 

 

 

Free cash flow

   $ 44,876      $ 7,056  
  

 

 

    

 

 

 

 

(1)

Capital expenditures during the three months ended March 31, 2018 and 2019 includes $2.2 million and $2.6 million, respectively, of principal payments under a three year agreement for equipment financing. The remaining balance on the equipment financing is $6.5 million as of March 31, 2019.

 

9


Average Revenue Per Subscriber - Calculation and Segment Detail

We present our financial results in the following three segments.

 

   

Web presence. The web presence segment consists primarily of our web hosting brands, including Bluehost and HostGator. This segment also includes related products such as domain names, website security, website design tools and services, and e-commerce products.

 

   

Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the SinglePlatform digital storefront solution.

 

   

Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with our domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to our web presence segment.

The following table presents the calculation of ARPS, on a consolidated basis and by segment (all data in thousands, except ARPS data):

 

     Three Months Ended
March 31,
 
     2018      2019  

Consolidated revenue

   $ 291,356      $ 280,683  

Consolidated total subscribers

     5,011        4,783  

Consolidated average subscribers for the period

     5,031        4,793  

Consolidated ARPS

   $ 19.30      $ 19.52  

Web presence revenue

   $ 155,017      $ 145,960  

Web presence subscribers

     3,811        3,612  

Web presence average subscribers for the period

     3,829        3,626  

Web presence ARPS

   $ 13.49      $ 13.42  

Email marketing revenue

   $ 102,447      $ 102,740  

Email marketing subscribers

     518        495  

Email marketing average subscribers for the period

     519        496  

Email marketing ARPS

   $ 65.83      $ 69.11  

Domain revenue

   $ 33,892      $ 31,983  

Domain subscribers

     682        676  

Domain average subscribers for the period

     683        671  

Domain ARPS

   $ 16.54      $ 15.88  

 

10


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, 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

   $ (6,108    $ 5,359      $ (1,779    $ (2,528

Interest expense, net(1)

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

Income tax (benefit) expense

     (4,679      4,163        (1,427      (1,943

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  

Gain of unconsolidated entities

     27        —          —          27  

Shareholder litigation reserve

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

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

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

 

 

    

 

 

    

 

 

    

 

 

 
     Three Months Ended March 31, 2019  
     Web presence      Email
marketing
     Domain      Total  

Revenue

   $ 145,960      $ 102,740      $ 31,983      $ 280,683  

Gross profit

   $ 72,241      $ 74,047      $ 10,541      $ 156,829  

Net (loss) income

   $ (6,542    $ 5,938      $ (2,884    $ (3,488

Interest expense, net(1)

     17,095        17,394        2,434        36,923  

Income tax (benefit) expense

     895        628        196        1,719  

Depreciation

     7,949        2,324        933        11,206  

Amortization of other intangible assets

     9,079        11,283        758        21,120  

Stock-based compensation

     4,893        3,083        1,040        9,016  

Restructuring expenses

     634        1,354        27        2,015  

Gain of unconsolidated entities

     —          —          —          —    

Shareholder litigation reserve

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 34,003      $ 42,004      $ 2,504      $ 78,511  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income.

 

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The following table represents the impact of the income statement revision to the first quarter of 2018 due to the revised deferred income tax provision (in thousands, except per share data):

 

     Three Months Ended March 31, 2018  
     Originally
Filed
     Adjustment      Revised  

Loss before income taxes and equity earnings of unconsolidated subsidiaries

   $ (4,444    $ —        $ (4,444

Income tax expense (benefit)

     2,617        (4,560      (1,943
  

 

 

    

 

 

    

 

 

 

Loss before equity earnings of unconsolidated subsidiaries

     (7,061      4,560        (2,501

Equity (income) loss of unconsolidated subsidiaries

     27        —          27  
  

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ (7,088    $ 4,560      $ (2,528
  

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

        

Foreign currency translation

     580        —          580  

Unrealized (gain) loss on cash flow hedge, net of tax

     1,041        —          1,041  
  

 

 

    

 

 

    

 

 

 

Total comprehensive loss

   $ (5,467    $ 4,560      $ (907
  

 

 

    

 

 

    

 

 

 

Basic net income (loss) per share

   $ (0.05    $ 0.03      $ (0.02
  

 

 

    

 

 

    

 

 

 

Diluted net income (loss) per share

   $ (0.05    $ 0.03      $ (0.02
  

 

 

    

 

 

    

 

 

 

Weighted-average common shares used in computing net income (loss) per share

        

Basic

     140,361,982        —          140,361,982  

Diluted

     140,361,982        —          140,361,982  

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  
     Originally
Filed
     Adjustment      Revised  

Deferred tax liability

   $ 27,679      $ (4,560    $ 23,119  

Total liabilities

     2,533,619        (4,560      2,529,059  

Accumulated deficit

     (795,206      4,560        (790,646

Total stockholders’ equity

     144,189        4,560        148,749  

Total liabilities and stockholders’ equity

     2,677,808        —          2,677,808  

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  
     Originally
Filed
     Adjustment      Revised  

Net income (loss)

   $ (7,088    $ 4,560      $ (2,528

Deferred tax expense

     492        (4,560      (4,068

Net cash provided by operating activities

     52,360        —          52,360  

 

12


GAAP to Non-GAAP Reconciliation of Fiscal Year 2019 Guidance (as of April 30, 2019) - Adjusted EBITDA

The following table reflects the reconciliation of fiscal year 2019 estimated net loss calculated in accordance with GAAP to fiscal year 2019 guidance for adjusted EBITDA. All figures shown are approximate.

 

($ in millions)

   Twelve Months Ending
December 31, 2019
 

Estimated net loss

   $ (17    $ (10

Estimated interest expense (net)

     146        148  

Estimated income tax expense (benefit)

     4        6  

Estimated depreciation

     44        48  

Estimated amortization of acquired intangible assets

     83        85  

Estimated stock-based compensation

     36        38  

Estimated restructuring expenses

     4        5  

Estimated transaction expenses and charges

     —          —    

Estimated (gain) loss of unconsolidated entities

     —          —    

Estimated impairment of other long-lived assets

     —          —    

Estimated shareholder litigation reserve

     —          —    
  

 

 

    

 

 

 

Adjusted EBITDA guidance

   $ 300      $ 320  
  

 

 

    

 

 

 

GAAP to Non-GAAP Reconciliation of Fiscal Year 2019 Guidance (as of April 30, 2019) - Free Cash Flow

The following table reflects the reconciliation of fiscal year 2019 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2019 guidance for free cash flow. All figures shown are approximate.

 

($ in millions)

   Twelve Months Ending
December 31, 2019
 

Estimated cash flow from operations

   $ 160      $ 175  

Estimated capital expenditures and financed equipment

     (50      (55
  

 

 

    

 

 

 

Free cash flow guidance

   $ 110      $ 120  
  

 

 

    

 

 

 

 

13