8-K/A
NASDAQ true Amendment 1 0001237746 0001237746 2019-09-13 2019-09-13

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K/A

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 13, 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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.0001 par value

 

EIGI

 

The Nasdaq Global Select Market

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.  

 

 


Introductory Note

On September 16, 2019, Endurance International Group Holdings, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) reporting that on September 13, 2019, the Company completed its acquisition of substantially all of the assets of Ecomdash, a software solutions provider that enables inventory management, distribution, and multichannel marketplace listings for ecommerce retailers, from LTD Software LLC. This Form 8-K/A amends the Initial Form 8-K to include the unaudited pro forma condensed combined financial information required by Item 9.01(b) of Form 8-K that was excluded from the Initial Form 8-K in reliance on the instructions to such items.

Item 9.01. Financial Statements and Exhibits

The financial information included as an Exhibit to this Item 9.01 of Form 8-K is provided due to Ecomdash meeting the “income test” set forth in Regulation S-X under the Securities Act of 1933, as amended, which is one of the prescribed tests for determining whether the financial statements of an acquired business are required to be filed.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial statements of the Company and Ecomdash as of June 30, 2019, for the year ended December 31, 2018, and for the six months ended June 30, 2019, and accompanying notes, are included as Exhibit 99.1 to this Current Report on Form 8-K.

(d) Exhibits

The following exhibits are included as part of this report:

    Exhibit    
No.

   

Description of Exhibit

         
 

99.1

   

Unaudited pro forma condensed combined financial statements of the Company and Ecomdash as of June 30, 2019, for the year ended December 31, 2018, and for the six months ended June 30, 2019

         
 

104

   

The cover page from this Current Report on Form 8-K, formatted in Inline XBRL


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: October 30, 2019

     

         

     

/s/ Marc Montagner

     

(Signature)

     

Name:  Marc Montagner

     

Title:    Chief Financial Officer

EX-99.1

Exhibit 99.1

Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of Endurance International Group Holdings, Inc. (hereinafter referred to as “Endurance,” “we,” “our,” “us,” and similar terms unless the context indicates otherwise) and LTD Software LLC (the “Seller”), and has been prepared to give effect to Endurance’s acquisition from the Seller of substantially all of the assets of Ecomdash (the “Acquisition”).

The unaudited pro forma condensed combined balance sheet data as of June 30, 2019 give effect to the Acquisition as if it had occurred as of June 30, 2019. The unaudited pro forma condensed combined statements of operations data for the year ended December 31, 2018 and the six months ended June 30, 2019 give effect to the Acquisition as if it had occurred as of January 1, 2018. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable and (3) with respect to statement of operations information, expected to have a continuing impact on the combined results of operations.

The pro forma condensed combined financial information is unaudited and is presented for illustrative purposes only. This financial information (including the pro forma adjustments) is preliminary and based upon available information and various adjustments and assumptions set forth in the accompanying notes, and is not necessarily an indication of the consolidated financial position or results of operations of Endurance that would have been achieved had the Acquisition been completed as of the dates indicated or that may be achieved in the future.

The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Endurance. These accounting policies are similar in most material respects to those of Ecomdash before the consummation of the Acquisition, except for the accounting for amortization of intangible assets. The unaudited pro forma condensed combined financial information reflects the amortization of intangible assets as a cost of revenue, which is consistent with our historical accounting policy for this item. The unaudited pro forma condensed combined statements of operations do not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that may or may not result from the Acquisition.

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions, as well as the audited consolidated financial statements and accompanying notes of Endurance for the year ended December 31, 2018 from our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 21, 2019; the audited financial statements and accompanying notes of LTD Software LLC for the year ended December 31, 2018 from our Current Report on Form 8-K filed with the SEC on September 16, 2019; and the unaudited consolidated financial statements and accompanying notes of Endurance for the six months ended June 30, 2019 from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed with the SEC on August 5, 2019.


Endurance International Group Holdings, Inc. and LTD Software LLC

Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2019

(in thousands)

 

     Historical              
     Endurance      Ecomdash     Pro Forma
Adjustments
    Pro Forma
Combined
 

Assets

         

Current assets:

         

Cash and cash equivalents

   $ 90,818      $ 21     $ (8,931 )(b)(c)    $ 81,908  

Restricted cash

     1,832        —         —         1,832  

Accounts receivable

     12,989        20       —         13,009  

Prepaid domain name registry fees

     57,326        —         —         57,326  

Prepaid commissions

     41,704        —         —         41,704  

Prepaid and refundable taxes

     6,517        —         —         6,517  

Prepaid expenses and other current assets

     26,411        —         —         26,411  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     237,597        41       (8,931     228,707  

Property and equipment—net

     88,700        4       —         88,704  

Operating lease right-of-use assets

     104,210        —         —         104,210  

Goodwill

     1,848,949        —         6,925 (a)      1,855,874  

Other intangible assets—net

     292,191        —         2,835 (a)      295,026  

Deferred financing costs—net

     2,221        —         —         2,221  

Investments

     15,000        —         —         15,000  

Prepaid domain name registry fees, net of current portion

     11,281        —         —         11,281  

Prepaid commissions, net of current portion

     45,160        —         —         45,160  

Other assets

     2,778        —         —         2,778  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,648,087      $ 45     $ 829     $ 2,648,961  
  

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

         

Current liabilities:

         

Accounts payable

   $ 14,933      $ 123     $ (42 )(a)    $ 15,014  

Accrued expenses

     64,774        241       (241 )(a)      64,774  

Accrued taxes

     2,418        —         —         2,418  

Accrued interest

     24,483        —         —         24,483  

Deferred revenue

     376,046        112       (34 )(a)      376,124  

Operating lease liabilities—short term

     22,483        —         —         22,483  

Current portion of notes payable

     31,606        650       (650 )(a)      31,606  

Current portion of financed equipment

     4,583        —         —         4,583  

Deferred consideration—short term

     1,408        —         750 (b)      2,158  

Other current liabilities

     2,319        —         55 (d)      2,374  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     545,053        1,126       (162     546,017  

Long-term deferred revenue

     99,249        —         —         99,249  

Operating lease liabilities—long term

     90,989        —         —         90,989  

Notes payable—long term

     1,725,326        1,025       (1,025 )(a)      1,725,326  

Deferred tax liability

     18,785        —         —         18,785  

Other liabilities

     6,460        —         —         6,460  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     2,485,862        2,151       (1,187     2,486,826  
  

 

 

    

 

 

   

 

 

   

 

 

 

Stockholders’ equity

     162,225        (2,106     2,016 (e)      162,135  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,648,087      $ 45     $ 829     $ 2,648,961  
  

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


The unaudited balance sheet as of June 30, 2019 reflects the following pro forma adjustments:

(a) The following table reflects Endurance’s preliminary purchase price allocation on a pro forma basis, as if the Acquisition had taken place on June 30, 2019:

 

     Preliminary
purchase price
allocation
 
     (in thousands)  

Current assets acquired

   $ 20  

Property, plant and equipment

     4  

Subscriber relationships

     390  

Developed technology

     2,445  

Goodwill

     6,925  

Current liabilities assumed

     (81

Deferred revenue

     (78
  

 

 

 

Total consideration, net of cash acquired

     9,625  
  

 

 

 

Cash acquired

     —    
  

 

 

 

Total purchase consideration

   $ 9,625  
  

 

 

 

Goodwill related to the acquisition is deductible for tax purposes.

(b) The following table reflects Endurance’s pro forma adjustments to account for the purchase consideration. The aggregate purchase price was $9.6 million, of which approximately $8.9 million was paid in cash at the closing. Endurance retained the remainder of the purchase price as a holdback to fund any working capital adjustment, if applicable, and to serve as security for the indemnification obligations of the Seller under the asset purchase agreement. Subject to any working capital adjustment and indemnification claims, Endurance will release the holdback funds to the Seller 12 months from the closing date.

 

     Sources of
purchase
consideration
 
     (in thousands)  

Use of Endurance cash

   $ 8,875  

Deferred consideration—short term

     750  
  

 

 

 

Total purchase consideration

   $ 9,625  
  

 

 

 

(c) The following table reflects Endurance’s pro forma adjustments to our cash and cash equivalents balance in order to account for the amounts paid with respect to the Acquisition.

 

     Amounts paid  
     (in thousands)  

Acquisition of Ecomdash—amounts paid at closing

   $ 8,875  

Acquisition costs paid at closing

     35  

Elimination of Ecomdash cash not acquired

     21  
  

 

 

 

Total cash paid

   $ 8,931  
  

 

 

 


(d) The following table reflects Endurance’s pro forma adjustments to our current liabilities for amounts accrued relating to $0.8 million of deferred consideration that was retained as a holdback and $0.1 million for various acquisition costs, including valuation and audit fees, not paid in cash at the time of closing.

 

     Liabilities  
     (in thousands)  

Endurance purchase consideration—short term (within deferred consideration—short term)

   $ 750  

Acquisition costs—accrued (within other current liabilities)

     55  
  

 

 

 

Total pro forma adjustment to current liabilities

   $ 805  
  

 

 

 

(e) The following table reflects Endurance’s pro forma adjustments to eliminate the shareholders’ equity of Ecomdash and to account for all acquisition costs, which consist of valuation and audit fees.

 

     Adjustments to
stockholders’
equity
 
     (in thousands)  

Eliminate equity of Ecomdash

   $ 2,106  

Transaction costs

     (90
  

 

 

 

Total pro forma adjustment to equity

   $ 2,016  
  

 

 

 


Endurance International Group Holdings, Inc. and LTD Software LLC

Unaudited Pro Forma Condensed Combined Statement of Operations

Twelve Months Ended December 31, 2018

(in thousands)

 

     Historical              
     Endurance     Ecomdash     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 1,145,291     $ 1,596     $ —       $ 1,146,887  

Cost of Revenue

     520,737       542       390 (a)      521,669  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     624,554       1,054       (390     625,218  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expense:

        

Sales and marketing

     265,424       —         —         265,424  

Engineering and development

     87,980       —         —         87,980  

General and administrative

     124,204       1,439       —         125,643  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     477,608       1,439       —         479,047  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     146,946       (385     (390     146,171  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     1,089       —         —         1,089  

Interest expense

     (149,480     (218     —         (149,698
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense—net

     (148,391     (218     —         (148,609
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (1,445     (603     (390     (2,438

Income tax benefit

     (6,246     —         (143 )(b)      (6,389
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity earnings of unconsolidated entities

     4,801       (603     (247     3,951  

Equity loss of unconsolidated entities, net of tax

     267       —         —         267  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 4,534     $ (603   $ (247   $ 3,684  
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


(a) The following table reflects the pro forma adjustment relating to the amortization of intangible assets acquired, including the cost and estimated useful life in years.

 

     Cost      Life (in years)      Amortization  
                   (in thousands)  

Amortization of intangible assets

        

Subscriber relationships

     390        15        41  

Developed technology

     2,445        7        349  
        

 

 

 

Total adjustment to amortization

         $ 390  
        

 

 

 

(b) The following table reflects the effect tax rate post acquisition, which is the blended rate for state and federal taxes.

 

     Tax rate  

Effective tax rate post acquisition

     14.4


Endurance International Group Holdings, Inc. and LTD Software LLC

Unaudited Pro Forma Condensed Combined Statement of Operations

Six Months Ended June 30, 2019

(in thousands)

 

     Historical              
     Endurance     Ecomdash     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 558,887     $ 872     $ —       $ 559,759  

Cost of Revenue

     263,441       258       195 (a)      263,894  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     295,446       614       (195     295,865  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expense:

        

Sales and marketing

     132,078       —         —         132,078  

Engineering and development

     49,042       —         —         49,042  

General and administrative

     62,517       722       —         63,239  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     243,637       722       —         244,359  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     51,809       (108     (195     51,506  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     605       —         —         605  

Interest expense

     (74,251     (84     —         (74,335
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense—net

     (73,646     (84     —         (73,730
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (21,837     (192     (195     (22,224

Income tax benefit

     7,879       —         41 (b)      7,920  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before equity earnings of unconsolidated entities

     (29,716     (192     (236     (30,144

Equity loss of unconsolidated entities, net of tax

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (29,716   $ (192   $ (236   $ (30,144
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


(a) The following table reflects the pro forma adjustment relating to the amortization of intangible assets acquired, including the cost and estimated useful life in years.

 

     Cost      Life (in years)      Amortization  
                   (in thousands)  

Amortization of intangible assets

        

Subscriber relationships

     390        15        20  

Developed technology

     2,445        7        175  
        

 

 

 

Total adjustment to amortization

         $ 195  
        

 

 

 

(b) The following table reflects the effect tax rate post acquisition, which is the blended rate for state and federal taxes.

 

     Tax rate  

Effective tax rate post acquisition

     10.7


Note 1—Basis of Presentation

The unaudited pro forma condensed combined balance sheet data as of June 30, 2019 give effect to the Acquisition as if it had occurred as of June 30, 2019. The unaudited pro forma condensed combined statements of operations data for the twelve months ended December 31, 2018 and for the six months ended June 30, 2019 give effect to the Acquisition as if it had occurred as of January 1, 2018. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable and (3) expected to have a continuing impact on the combined results of operations.

We have accounted for the Acquisition using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

The pro forma adjustments described above were developed based on Endurance’s assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Ecomdash based on preliminary estimates of fair value. The final purchase price allocation may differ from what is currently reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized. Additionally, the Acquisition and related transaction costs were funded primarily from cash and cash equivalents of Endurance, and to a lesser extent, through deferred consideration.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the Acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

The unaudited pro forma condensed combined financial information does not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that may or may not result from the Acquisition.

As part of the acquisition agreement, we acquired substantially all the assets and assumed certain of the liabilities of Ecomdash from the Seller.

Endurance historically has recorded all amortization expense related to acquired intangible assets as a cost of revenue. The unaudited combined condensed financial information reflects all amortization expense related to intangible assets as a cost of revenue.

Note 2—Preliminary Allocation of Purchase Consideration

The aggregate purchase price was $9.6 million, of which approximately $8.9 million was paid in cash at the closing. Endurance retained the remainder of the purchase price as a holdback to fund any working capital adjustment, if applicable, and to serve as security for the indemnification obligations of the Seller under the asset purchase agreement. Subject to any working capital adjustment and indemnification claims, Endurance will release the holdback funds to the Seller twelve (12) months from the closing date.

Transaction costs were expensed as incurred. Endurance has accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

Goodwill related to the acquisition is deductible for tax purposes.


The following table summarizes the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed at the date of acquisition:

 

     September 13, 2019  
     (in thousands)  

Working capital

   $ (163

Goodwill

     6,953  

Developed technology

     2,445  

Subscriber relationships

     390  
  

 

 

 

Total

   $ 9,625  
  

 

 

 

The purchase price allocation is preliminary, and will be final when Endurance has completed the valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments and from the preliminary allocation shown above.

Note 3—Expected Future Amortization

The table below reflects the expected amortization related to the preliminary fair value of the intangible assets acquired for the five years following the Acquisition (in thousands):

 

     Year following the Acquisition  
     Year 1      Year 2      Year 3      Year 4      Year 5  

Subscriber relationships

   $ 41      $ 46      $ 47      $ 43      $ 40  

Developed technology

     349        350        349        349        349  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 390      $ 396      $ 396      $ 392      $ 389