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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-K
 
 (Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36131
 
 
 
Endurance International Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
Delaware
 
46-3044956
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
10 Corporate Drive,
Suite 300
 
01803
Burlington,
Massachusetts
 
(Address of principal executive offices)
 
(Zip Code)

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

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

Securities registered pursuant to Section 12(g) of the Act:
None 
 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer
¨
 
Accelerated filer
ý

Non-accelerated filer
¨
 
Smaller reporting company
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.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
The aggregate market value of common stock held by non-affiliates of the registrant based on the closing price of the registrant’s common stock as reported on the Nasdaq Global Select Market on June 28, 2019, was $354,539,270.
As of February 10, 2020, there were 147,690,582 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of December 31, 2019, are incorporated by reference into Part III of this Annual Report on Form 10-K.
 



TABLE OF CONTENTS
 
 
Page
PART I.
 
PART II.
 
PART III.
 
PART IV.
 



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “may,” “believe,” “predict,” “potential,” “continue,” “could,” “should,” “contemplate,” “can,” “estimate,” “intend,” “likely,” “would,” “project,” “seek,” “target,” “might,” “plan,” “strategy,” “expect,” and similar expressions or variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. This Annual Report on Form 10-K includes, among other things, forward-looking statements regarding our future results, growth and financial position, including, without limitation, statements about:
our 2020 operating plan, including our plans to deliver increased valued to customers and to simplify our operations;
our plans to invest during 2020 in engineering and development and marketing efforts for our strategic brands, and the anticipated impact or results of such investments;
trends in our cost of revenue and gross profit;
our expectations regarding impairments of goodwill and other intangible assets;
our expectations regarding cash flow from operations, adjusted EBITDA and free cash flow;
the impact of laws and regulations that affect our business; and
the impact of competition.
These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make as a result of a number of important factors. These important factors include our “critical accounting policies and estimates” described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates and the factors set forth in Part I, Item 1A, Risk Factors and elsewhere in this Annual Report on Form 10-K. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, and we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of any new information, events, circumstances or otherwise.
As used in this Annual Report on Form 10-K, the terms “Endurance,” “the Company,” “we,” “us,” and “our” mean Endurance International Group Holdings, Inc. and its subsidiaries unless the context indicates otherwise.

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Part I 
ITEM 1.
Business
We are a leading provider of cloud-based platform solutions designed to help small- and medium-sized businesses, or SMBs, succeed online. We serve approximately 4.8 million subscribers globally with a range of products and services that help SMBs get online, get found and grow their businesses. In addition to for-profit businesses, our subscribers include non-profit organizations, community groups, bloggers, and hobbyists. Although we provide our solutions through a number of brands, we are focusing our marketing, engineering and product development efforts on a small number of strategic assets, including our Constant Contact, Bluehost, HostGator, and Domain.com brands.
From fiscal year 2017 through the end of fiscal year 2019, we have reported our business results in three reportable segments, as follows:
Web Presence. Our 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. Our email 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, or Ecomdash, which we acquired in the third quarter of 2019. For most of 2019, the email marketing segment also included the SinglePlatform digital storefront business, which we sold on December 5, 2019.
Domain. Our 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.
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. In 2020, we plan to modify our internal reporting structure to reflect these changes in our structure and leadership, and also to change the name of the email marketing segment to the "digital marketing" segment. This will result in consolidation of our current domain segment into our web presence segment, such that we expect to report our financial results in two segments - web presence (including domains) and digital marketing - beginning with the first quarter of 2020.
You can find more information about our reportable segments in Note 21, Segment Information, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Our Market, Products and Services
SMBs represent a large and diverse market, both in the United States and internationally. According to the U.S. Small Business Administration, there were approximately 30.7 million small businesses in the United States in 2016. Of these small businesses, approximately 24.8 million were non-employer firms, or companies that do not have paid employees. In addition, in 2015, the International Labour Organization of the United Nations estimated that there were between 420 and 510 million small and medium-sized enterprises (defined as one to 250 employees) worldwide.
Many SMBs have limited technological and marketing expertise, time and financial resources. However, we believe SMBs understand that the Internet and the proliferation of mobile devices are changing the way consumers discover and transact with businesses, making an effective online presence critical.
We provide our products and services through two strategic platforms: web presence (which consists of the web presence and domain segments) and email marketing (which corresponds to our email marketing segment). Our offerings, which consist of both proprietary applications and third-party products, are designed to help SMBs succeed online at every stage of their business.
Web Hosting. By providing a set of core products that combine storage, bandwidth and processing power, our entry-level shared hosting services enable subscribers to create an initial web presence quickly and cost-effectively. Our shared hosting packages offer several options for building a website, including our website builder (discussed below) and a variety of Wordpress hosting packages.
In addition to providing shared hosting services, we also provide virtual private server, or VPS, hosting and dedicated hosting solutions. As a subscriber’s business expands and the demands on its website increase, these more customizable

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and higher performance solutions allow our subscribers to build additional functionality into their websites, offer high bandwidth content and drive more commerce and marketing activities while reducing load times and increasing site speeds. Subscribers can start with an advanced web hosting solution or upgrade from an existing shared hosting service.
Website Builder. Our website builder tool allows customers to quickly create a customized, professional-looking website. Users of our website builder can also take advantage of our logomaker tool, which generates a range of customizable business logos that can be automatically integrated into websites and email marketing templates, and a range of other products to promote their business, such as an email marketing tool powered by Constant Contact, search engine marketing, search engine optimization, and Google My Business.
Domain Registration, Management and Resale. As an accredited domain registrar with approximately 11.3 million domains under management at December 31, 2019, we enable our subscribers to search and purchase available domain names from a wide spectrum of domain registries. We also offer domain privacy, which allows customers to register a domain name without publicly listing their name and contact information, and domain protection, which helps customers avoid inadvertently failing to renew a domain name due to outdated credit card or contact information. In addition, we maintain a portfolio of premium domains that are available for resale.
Email Marketing. Our Constant Contact email marketing solutions allow small businesses and other organizations to easily create, send and track professional-looking email campaigns, allowing them to communicate effectively with their customers and potential customers via email. Email marketing services available to subscribers include building and segmenting mailing lists, designing and managing email newsletters, scheduling and sending email messages, and reporting and tracking the results of each campaign. We also provide a library of third party integrations that allow subscribers to easily import, sync, and manage their contacts from external databases, manage events online, and conduct surveys. Our subscribers can also take advantage of our website builder tool and Constant Contact Marketing Advisor, which allows them to speak live by phone or online chat with a marketing advisor to get the guidance they need.
E-commerce Enablement. We offer products that enable our subscribers to sell their products and services online, including secure and encrypted payments, shopping carts, inventory management, online marketplace listing solutions, payment processing and related services and mobile payments. We also feature products that help our subscribers maximize their sales opportunities, including segmentation tools that allow email marketing campaigns to target specific categories of shoppers, and customized “buy now” pages that can be embedded into an email newsletter.
Security. We offer malware protection solutions to help our subscribers safeguard their websites from viruses, malicious code and other threats, as well as web application firewalls, which can help prevent attacks on subscriber websites before they affect subscriber data or operations. We also offer Secure Socket Layer, or SSL, certificates that encrypt data collected on a website, for subscribers that collect personally identifiable information or other private data from their customers and website visitors. We provide a free basic SSL certificate to substantially all of our web hosting, domain and website builder customers, and we offer premium SSL packages for customers seeking additional features.
Site Back-Up. We offer backup control solutions that enable subscribers to schedule, maintain, manage and restore backups of their online data and websites.
Search Engine Optimization (SEO) and Search Engine Marketing (SEM). We offer a variety of search engine optimization and marketing solutions that can improve a subscriber’s ability to be discovered by potential customers. These services help a subscriber distribute its business profile to online directories and manage links and keywords with on-page diagnostic tools. We also offer pay-per-click (PPC) services designed to direct traffic to a subscriber’s website.
Mobile. We offer solutions that allow our subscribers to have their websites and email marketing campaigns rendered on mobile devices and target mobile customers for their businesses, among other features and functionality. Our website builder solutions offer mobile-ready templates, which enable small businesses to ensure that their websites render well on desktops, laptops, tablets, and smartphones. Subscribers can also manage their websites and email marketing campaigns while on the go, both through mobile browsers and native apps.
Social Media. We offer tools and services that help our subscribers to communicate effectively with their customers and potential customers through social networks and to coordinate their website and email marketing efforts with their social media presence.
Productivity Solutions. We offer our subscribers a range of leading business productivity tools, including Microsoft Office 365 and G Suite by Google Cloud. These tools include, among others, professional email, word processing and presentation software, online storage, shared calendars, and video meetings.
Analytics. We offer control panels and dashboards that provide our subscribers with tools to analyze activity on their websites.

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Professional Services. We offer professional services for subscribers who want additional assistance establishing and growing their online presence, including website design, marketing services (including assistance with search engine optimization and search engine marketing), social media management services, and website migration services.
Sales & Marketing
Although we operate through numerous brands, we are focusing our marketing expenditures on our strategic brands, which include Constant Contact, Bluehost, HostGator and Domain.com.
For our web presence segment, the majority of our program marketing expense has historically been associated with targeted online search marketing, including for inclusion of our brands in online directories, and with payments to our large network of referral partners, who drive subscribers to us on a paid referral basis. Payments to our referral partners primarily occur after a subscriber signs up on our platform and therefore allow us to readily determine the returns on our marketing spend. We also attract new subscribers through word-of-mouth referrals and through partnerships that help us reach additional subscribers, such as our partnerships with Google and WordPress.
For our email marketing segment, we market our products and acquire our customers through a variety of sources, including online marketing, such as search engines and advertising on social media, YouTube, and other websites, offline marketing through television and radio advertising, partner relationships, outbound sales efforts, referrals from our customer base, general brand awareness and a link to our website in the footer of substantially all of the emails sent by our customers. We have partner relationships with over 10,000 local and national small business service providers. These partners refer customers to us through links on their websites and outbound promotions to their customers or allow us to market to their customers directly. Our online, television, and radio advertising is designed to educate potential customers about our email marketing solutions and raise awareness of our brand.
For our domain segment, we use a combination of online search marketing and a network of referral partners, as well as joint marketing efforts with registries of various generic top level domain names, such as ".com", aimed at increasing subscribers.
Subscriber Support
Our support agents assist our subscribers via phone, email, chat and social media. Our support personnel not only assist subscribers with technical issues, but also focus on understanding the business goals of each subscriber to help identify the right products and services to achieve those goals. Our primary support centers are located in Arizona, Colorado, Massachusetts, Texas, Brazil and India. In addition, we have third-party support arrangements in India, the Philippines and China.
Technology Platform and Infrastructure
The primary technology platforms supporting our web presence and domain segments combine open source and proprietary software, and are based on a scalable architecture that allows us to operate with a large number of subscribers per server. In addition, we use subscriber relationship management, billing and subscriber service support systems to on-board, serve and track our subscribers, and to enable them to manage their own service experience. We currently serve most of our web presence and domain subscribers from five U.S.-based data centers, one of which is owned by us and the rest of which are co-located.
For our most of email marketing segment, we use a central application and a single software code base with unique accounts for each subscriber. As a result, we are able to spread the cost of providing our products across our email marketing customer base. In addition, because we have one central application, we believe we are able to scale our business to meet increases in demand for our products. We own all of the hardware deployed in support of our platform. Our production system hardware and the disaster recovery hardware for our production system are co-located in third-party hosting facilities in Massachusetts and Texas.
Our website builder and our Ecomdash inventory management and marketplace listing solution are hosted on public cloud services.
Subscriber Profile
As of December 31, 2019, we had approximately 4.8 million subscribers, of which approximately 3.6 million were web presence subscribers, 0.5 million were email marketing segment subscribers and 0.7 million were domain segment subscribers. Based on data from a 2018 survey of subscribers of our major web presence brands, we believe a majority of our web presence subscribers are SMBs, most of whom are businesses with five or fewer employees. We estimate that over 70% of subscribers of our email marketing segment employ 25 or fewer employees.
The industries in which our subscribers operate are very diverse, including retail, restaurants, professional services, non-profits, merchandising, media, recreation, education, construction, health, beauty and wellness, and arts and entertainment,

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among others. In addition to for-profit businesses, our subscribers include non-profit organizations, community groups, bloggers, and hobbyists.
Geographical Information
We currently maintain offices and conduct operations primarily in the United States, Brazil, India, and the Netherlands. We also have third-party support arrangements in India, the Philippines, and China. For additional information about our geographic areas, see Note 22, Geographic and Other Information, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Competition
The global cloud-based services market for SMBs is highly competitive and constantly evolving. For our web presence and domain segments, we expect continued competition, both domestically and internationally, from a number of sources, including the following:
competitors in the domain, hosting and website builder markets such as GoDaddy, Ionos by 1&1, Wix, Squarespace, Weebly (now owned by Square), and Web.com;
Wordpress.com and Wordpress-focused hosting companies such as WPEngine and SiteGround;
e-commerce, payments, email marketing, and marketing automation companies that are expanding their offerings to include website builders or other web presence offerings;
cloud hosting providers; and
large companies like Amazon, Microsoft and Google, which offer web hosting or website builders, domain registration and other cloud-based services, and Facebook, which offers an Internet marketing platform.
For our email marketing segment, we expect continued competition from MailChimp and other SMB-focused email marketing vendors, as well as additional competition from providers of marketing automation software and web presence competitors who are expanding their offerings to include email marketing functionality.
Competitors in each of our segments are expanding their offerings into adjacent products and services in order to provide a more comprehensive set of business solutions for SMBs, and in some cases, companies that previously competed with us in one of our segments are now competing with us in most or all of them. In addition, marketing automation, ecommerce, payments and other online services companies that have not competed with us in the past are expanding into our market by providing website builder and email marketing tools, and by enhancing offerings tailored for SMBs.
We believe the principal competitive factors in the cloud-based services market for SMBs include: ease of use and effectiveness; availability of integrated, comprehensive solutions; product functionality, performance and reliability; customer service and support; brand awareness and reputation; affordability; and product scalability. In some instances, we have commercial partnerships with companies with which we also compete.
See Part I, Item IA, Risk Factors for additional discussion of competition as it pertains to our business.
Seasonality
Our web presence and domain segments have historically experienced moderately increased subscriber billings in the first quarter of our fiscal year as many subscribers start businesses at the beginning of a new year. These segments record a significant portion of these billings as deferred revenue and recognize the deferred revenue throughout the course of the year and beyond based on the term of the applicable subscription. This slight seasonality has a favorable impact on our operating cash flows in the early part of each fiscal year, and an unfavorable impact in the latter part of each fiscal year. We expect that this seasonality will continue.
Intellectual Property and Proprietary Rights
Our intellectual property and proprietary rights are important to our business. We rely on a combination of trademark, patent, copyright and trade secret laws, and confidentiality and other contractual provisions to protect our proprietary technologies, confidential information, brands and other intellectual property.
We use open source technologies pursuant to applicable licenses as the basis for our technology platform. We have also developed, acquired or licensed proprietary technologies for use in our business. As of January 15, 2020, we have eighteen U.S. patents as well as one pending U.S. patent application and several pending foreign counterpart applications relating to aspects of our technology platform and offerings, including our shared services architecture, predictive analytics methods, virtualization technologies, subscriber migration technologies, web presence improvement technologies, and email composition and editing technologies. We believe the duration of our patents is adequate relative to the expected lives of the technologies they cover.

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We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines and logos in the United States and other countries to the extent we determine appropriate and cost-effective. We also have common law rights in some unregistered trademarks that were established through years of use. In addition, we have a trademark and service mark enforcement program pursuant to which we monitor applications filed by third parties to register trademarks and service marks that may be confusingly similar to ours.
We have non-disclosure, confidentiality and license agreements with employees, contractors, subscribers and other third parties, which limit access to and use of our proprietary information; however, unauthorized disclosure of our confidential information or proprietary technologies by our employees or third parties could still occur. In addition, unauthorized third parties may attempt to copy, reverse engineer or otherwise obtain access to our proprietary rights. The risk of unauthorized use of our proprietary and intellectual property rights may increase as we expand outside of the United States.
Third-party infringement claims are also possible in our industry, especially as functionality and features expand, evolve and overlap across industries. Third parties, including non-practicing patent holders, have claimed, and could claim in the future, that our processes, technologies or websites infringe patents they now hold or might obtain or that might be issued in the future. See Part I, Item 1A, Risk Factors for additional discussion about the substantial costs that we could incur as a result of any claim of infringement of another party’s intellectual property rights.
Laws and Regulations
Advertising and promotional information presented on our websites, in our products, and in our other marketing and promotional activities are subject to federal and state consumer protection laws regulating unfair and deceptive acts or practices. U.S. federal, state, and foreign legislatures have also adopted laws and regulations regulating numerous other aspects of our business. Regulations relating to the Internet, including laws governing user privacy and data protection, unsolicited commercial email (spam), and online content and liability for third-party online activities, are particularly relevant to our business. Such laws and regulations are discussed below and in Part I, Item 1A, Risk Factors.
Consumer Protection Laws. We are subject to consumer protection laws and regulations that regulate our marketing practices and/or prohibit unfair or deceptive acts or practices, including under the auspices of the U.S. Federal Trade Commission, or FTC; the Telephone Consumer Protection Act, or TCPA; the Telemarketing Sales Rule; and state consumer protection statutes. These laws and regulations require, among other things, certain disclosures or functionality in our brand websites, customer communications, and the ordering process for our products; obtaining customer consent prior to placing sales calls or sending text messages to wireless numbers; and compliance with “do not call” or “do not contact” laws or requests from individuals. We are also subject to consumer protection laws outside of the United States, which may include privacy and data protection laws, telemarketing laws, regulation of cloud services, e-commerce and distance selling regulation, advertising regulation, unfair competition rules or similar legislation.
Privacy and Data Protection. We collect personally identifiable information and other data from our subscribers and prospective subscribers, as well as from their customers and contacts. We use this information to provide services to our subscribers, to support, expand and improve our business and (subject to each subscriber’s or prospective subscriber’s, or their customers' or contacts', right to decline or opt out) we may use this information to market other products and services to them or to assist our subscribers in marketing their own products and services to their customers and contacts. We may also share subscribers’ personally identifiable information with certain third parties as directed by the subscriber or as described in our privacy notice. In addition, the data we collect from or about our employees as part of our standard human resources procedures is also subject to various laws and regulations in the jurisdictions where we operate, including evolving California laws and EU laws on data export.
The U.S. federal and various state and foreign governments have adopted or proposed guidelines or rules for the collection, distribution, use and storage of information collected from or about consumers or their devices. The FTC and various U.S. state and local governments and agencies regularly use their authority under laws prohibiting unfair or deceptive marketing and trade practices to investigate and penalize companies for practices related to the collection, use, handling, disclosure, dissemination and security of personal data of U.S. consumers. For example, California recently adopted the California Consumer Privacy Act, or CCPA, which became effective on January 2, 2020 and can be enforced by the Attorney General as of July 1, 2020. The CCPA, among other things, requires covered companies to provide new disclosures to California consumers and offer them new abilities to opt-out of certain sales of personal information, as well as to request access to or deletion of their personal information. The law also affords consumers qualified rights to seek liquidated penalties if unauthorized parties gain access to their unredacted, unencrypted personally identifiable information by reason of our failure to adopt and maintain reasonable security measures. Further legislative changes in California, or in other U.S. states, are under consideration. In this highly dynamic legislative, regulatory, and litigation environment, we cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies in varying ways across our business and brands, and to incur substantial costs and expenses in an effort to comply, or if we become subject to governmental enforcement or private party litigation.

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In addition, several foreign countries and governmental bodies, including the countries of the European Union, or EU, Canada, and Brazil, have adopted data protection laws and regulations different from and more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, export, disclosure and security of personal data that identifies or may be used to identify an individual, such as names, contact information, and, in some jurisdictions, certain unique identifiers. These laws and regulations are subject to revisions and differing interpretations, and have generally become more stringent over time. Furthermore, additional countries and other jurisdictions are considering the adoption of similar laws and regulations.
In May 2018, the EU-wide General Data Protection Regulation, or GDPR, took effect. The GDPR implemented more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, increased requirements to erase an individual’s information upon request and comply with other requests from individuals, mandatory data breach notification requirements, restrictions on automated decision-making and profiling, and higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR has also imposed more stringent consent requirements related to cookies and similar technologies. Penalties under the GDPR are significant: fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be imposed. Moreover, under certain circumstances, we may be considered liable for non-compliance by our third-party partners with the GDPR or other privacy laws and regulations.
Anti-SPAM Laws. We are subject to the U.S. Controlling the Assault of Non Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, which establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future emails from the sender, and carries significant penalties for violations. In addition, some states and countries have passed laws regulating commercial email practices that are significantly more punitive and difficult to comply with than the CAN-SPAM Act, such as Canada’s Anti-Spam Legislation, or CASL, and the GDPR. These types of laws are particularly significant for our email marketing segment.
Laws Relating to Online Content and Liability for Third Party Activities. Our role as a provider of cloud-based solutions, including website hosting services, domain registration services and email marketing, may subject us to potential liability for the activities of our subscribers on or in connection with their websites or domain names or for the data they store on or send using our servers. Although our subscriber terms of use prohibit illegal use of our services by our subscribers and permit us to take down websites or take other appropriate actions for illegal use, subscribers may nonetheless engage in prohibited activities or upload, transmit or store content with us in violation of applicable law, third-party rights, or the subscriber’s own policies, which could subject us to liability. Several U.S. federal statutes apply to us with respect to various subscriber activities:
The Digital Millennium Copyright Act of 1998, or DMCA, provides recourse for owners of copyrighted material who believe that their rights under U.S. copyright law have been infringed on the Internet. Under the DMCA, based on our current business activity as an online service provider that does not monitor, own or control website content posted by our subscribers, we generally are not liable for copyright infringing content posted by our subscribers or other third parties, provided that we follow the procedures for handling copyright infringement claims set forth in the DMCA. Generally, if we receive a proper notice from, or on behalf of, a copyright owner alleging infringement of copyrighted material located on websites we host, and we fail to expeditiously remove or disable access to the allegedly infringing material or otherwise fail to meet the requirements of the safe harbor provided by the DMCA, the copyright owner may seek to impose liability on us.
The Communications Decency Act of 1996, or CDA, generally protects interactive computer service providers such as us, from liability for certain online activities of their customers, such as the publication of defamatory or other objectionable content. As an interactive computer services provider, we do not monitor hosted websites or prescreen the content placed by our subscribers on their sites. Accordingly, under the CDA, we are generally not responsible for the subscriber-created content hosted on our servers. However, the CDA does not apply in foreign jurisdictions, and legislation such as the Allow States and Victims to Fight Online Sex Trafficking Act of 2017, or FOSTA, as well as new legislation that may be enacted in the future, may reduce the immunity provided to us by the CDA.
In addition to the CDA, the Securing the Protection of our Enduring and Established Constitutional Heritage Act, or the SPEECH Act, provides a statutory exception to the enforcement by a U.S. court of a foreign judgment that is less protective of free speech than the United States. Generally, the exception applies if the law applied in the foreign court did not provide at least as much protection for freedom of speech and press as would be provided by the First Amendment of the U.S. Constitution or by the constitution and law of the state in which the U.S. court is located, or if no finding of a violation would be supported under the First Amendment of the U.S. Constitution or under the constitution and law of the state in which the U.S. court is located. Although the SPEECH Act may protect us from

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the enforcement of foreign judgments in the United States, it does not affect the enforceability of the judgment in the foreign country that issued the judgment.
See Part I, Item 1A, Risk Factors for more information about our legal and regulatory risks.
Employees
As of December 31, 2019, we had 3,762 employees, including 1,786 in support and network operations, 766 in sales and marketing, 747 in engineering and development, and 463 in general and administrative. Excluded from our employee figures are approximately 1,500 individuals primarily located in India and the Philippines who are directly employed by third parties and perform a range of services for us, including email-, phone- and chat-based customer and technical support, billing support, network monitoring and engineering and development services. Most of our employees are based in the United States. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We have never experienced a strike or similar work stoppage, and we consider our relations with our employees to be good.
Corporate Information
Our business was founded in 1997 as a Delaware corporation under the name Innovative Marketing Technologies Incorporated. In December 2011, investment funds and entities affiliated with Warburg Pincus and Goldman, Sachs & Co. acquired a controlling interest in our company. Prior to our initial public offering, or IPO, in October 2013, we were an indirect wholly owned subsidiary of WP Expedition Topco L.P., a Delaware limited partnership that we refer to as WP Expedition Topco. Pursuant to the terms of a corporate reorganization that we completed prior to our IPO, WP Expedition Topco dissolved and in liquidation distributed the shares of common stock of Endurance International Group Holdings, Inc. to its partners in accordance with the limited partnership agreement of WP Expedition Topco. We have completed numerous acquisitions since inception, including the acquisition of Constant Contact, Inc. in February 2016.
Our principal executive offices are located at 10 Corporate Drive, Suite 300, Burlington, Massachusetts 01803 and our telephone number at that address is (781) 852-3200.
Information Available on the Internet
We maintain an Internet website at www.endurance.com, and we also operate a number of other websites. The information on, or that can be accessed through, any of our websites is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report on Form 10-K as inactive textual reference only. Our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports, are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the Securities and Exchange Commission, or the SEC. We also make available on our website the charters of our audit committee, compensation committee and nominating and corporate governance committee, as well as our corporate governance guidelines and our code of business conduct and ethics. In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be disclosed pursuant to SEC rules.

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ITEM 1A.
Risk Factors
Our business, financial condition, results of operations and future growth prospects could be materially and adversely affected by the following risks or uncertainties. The risks and uncertainties described below are those that we have identified as material, but they are not the only risks and uncertainties we face. Our business is also subject to general risks and uncertainties that affect many other companies, including overall economic and industry conditions, as well as other risks not currently known to us or that we currently consider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition, results of operations and growth prospects could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K and in our other public filings.
Risks Related to Our Business and Our Industry
We may not be able to add new subscribers, retain existing subscribers or increase sales to existing subscribers, which could adversely affect our operating results.
Our growth is dependent on our ability to continue to attract and acquire new subscribers while retaining existing subscribers and expanding the products and services we sell to them. Growth in the demand for our products and services may be inhibited, and we may be unable to grow our subscriber base, for a number of reasons, including, but not limited to:
our failure to develop or offer new or enhanced products and services in a timely manner that keeps pace with new technologies, competitor offerings, the current industry trend toward comprehensive, integrated web presence and marketing automation solutions, and the evolving needs of our subscribers;
difficulties providing or maintaining a high level of subscriber satisfaction, which could cause our existing subscribers to cancel their subscriptions or stop referring prospective subscribers to us;
increases in our subscriber churn rates or our failure to convert subscribers from introductory, discounted products to full priced solutions;
perceived or actual security, availability, integrity, privacy, reliability, quality or compatibility problems with our solutions, including related to unscheduled downtime, outages or network security breaches;
our inability to maintain awareness of our brands, including due to fragmentation of our marketing efforts due to our historical approach of maintaining a portfolio of multiple brands rather than focusing our resources on a single brand or a few brands;
continued or increased competition in the SMB market, including greater marketing efforts or investments by our competitors in advertising and promoting their brands or in product development;
changes in search engine ranking algorithms or in search terms used by potential subscribers; or
our inability to market our solutions in a cost-effective manner to new subscribers or to our existing subscribers due to changes in regulation, or changes in the enforcement of existing regulation, that would affect our marketing or pricing practices.
Due to these or other reasons, we may not be able to maintain positive subscriber growth in the future, which could have a material adverse effect on our business and financial results.
We must keep up with rapid and ongoing technological change, marketing trends and shifts in consumer demand to remain competitive in a rapidly evolving industry.
The cloud-based technology and online marketing solution industries are characterized by rapid and ongoing technological change, frequent new product and service introductions and new market entrants, and evolving industry standards. Our methods for marketing to our subscribers and potential subscribers must keep pace with technological change, legal requirements, market trends, and shifts in how our solutions are found, purchased and used by subscribers. For example, application marketplaces, mobile platforms, ecommerce tools, voice-activated technology, and greater availability of web presence and email marketing tools from ecommerce, payments and marketing automation companies are changing the way consumers find, purchase and use our solutions. Our future success will depend on our ability to adapt to rapidly changing technologies and evolving industry standards and to anticipate subscriber needs and preferences. If we are not able to offer innovative and comprehensive solutions, take advantage of new technology, adapt our marketing practices or anticipate changing trends, we may be unable to continue to attract new subscribers or sell additional solutions to our existing subscribers. In addition, if existing technologies or systems, such as the domain name system that directs traffic on the Internet, become less relevant due to changing technologies, or if we fail to anticipate and manage technologies that harm or reduce consumer demand for our offerings, our revenue and operating results may be adversely affected.
We face significant competition for our solutions in the SMB market, which we expect will continue to intensify. As a result of such competitive pressures, we may not be able to maintain or improve our competitive position or market share.
The SMB market for cloud-based technologies and online marketing tools is highly competitive and constantly evolving. Some of our competitors have greater marketing, engineering, product development and other resources, more brand

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recognition and consumer awareness, more scalable, more comprehensive or better integrated product offerings, greater international scope or larger subscriber bases than we do, or may partner with large Internet companies that can offer these resources. As a result, we may not be able to compete successfully against them. Our competitive position may also be challenged by new market entrants (both new companies and established companies expanding their product offerings or target customers), since there are relatively few barriers to entry in our market.
We have faced and expect to continue to face intense competition in our web presence and domain segments, both domestically and internationally, from a number of sources, including the following:
competitors in the domain, hosting and website builder markets such as GoDaddy, Ionos by 1&1, Wix, Squarespace, Weebly (now owned by Square), and Web.com;
Wordpress.com and Wordpress-focused hosting companies such as WPEngine and SiteGround;
e-commerce, payments, email marketing, and marketing automation companies that are expanding their offerings to include website builders or other web presence offerings;
cloud hosting providers; and
large companies like Amazon, Microsoft and Google, which offer web hosting or website builders, domain registration and other cloud-based services, and Facebook, which offers an Internet marketing platform.
For our email marketing segment, we expect continued competition from MailChimp and other SMB-focused email marketing vendors, as well as additional competition from providers of marketing automation software and web presence competitors who are expanding their offerings to include email marketing functionality.
Competitors in each of our segments are expanding their offerings into adjacent products and services in order to provide a more comprehensive set of business solutions for SMBs. In some cases, companies that previously competed with us in one of our segments are now competing with us in most or all of them, as email marketing providers begin to offer website builders, and vice versa. In addition, marketing automation, ecommerce, payments and other online services companies that have not competed with us in the past are expanding into our market by providing website builder and email marketing tools, and by enhancing offerings tailored for SMBs. As a result of these changes, SMBs now have a broader range of “entry points” for establishing an online presence, and may choose to do so through an e-commerce, payments, or marketing solutions provider that provides a website builder, hosting or email marketing as part of a “bundled” solution, rather than starting with a domain name or hosting account.
In addition, our competitors have and may continue to offer price discounts or alternative pricing models for the products and services they offer, such as "freemium" pricing in which a basic offering is provided for free with advanced features provided for a fee. Some of our competitors have used the freemium model successfully to drive both free and paid subscriber growth. Although we do have freemium offerings, they are not extensive, which could put us at a disadvantage relative to these competitors with respect to subscriber growth. In addition, we sometimes need to match our competitors' discounts or the commissions they pay to referral sources in order for our products to remain competitive, which could reduce our margins.
Our business and operations are complex due to our history of acquisitions and organizational change, which has and may continue to result in operational and other challenges.
As a result of acquisitions and internal growth, we increased our revenue from $741.3 million in the year ended December 31, 2015 to $1.1 billion in the year ended December 31, 2019. During this time period, we completed numerous acquisitions, including the acquisition of the Directi web presence business in January 2014, which expanded our international operations, and the acquisition of Constant Contact in February 2016.
Due to our history of acquisitions, we offer our products and services through numerous brands that operate from different websites, control panels, billing systems, information technology and other systems. As a result, compliance assessments, compliance-related changes, roll-outs of new products and platform, product and technology upgrades, and changes in business processes often need to be implemented more than once. This level of complexity has sometimes resulted and may continue to result in difficulties maintaining effective internal controls, reliance on manual controls, challenges in maintaining and upgrading our technology platforms, additional compliance costs and risks, product roll-out inefficiencies, and other operational challenges.
In particular, differences across our multiple billing systems have at times made it challenging for us to accurately and consistently determine certain enterprise-wide operational metrics, such as total subscribers. Total subscribers and other operational metrics, which we voluntarily disclose, historically have not been subject to the same level of reporting controls as our financial statements and other financial information we are required to disclose. Also, we have identified in the past, and may in the future identify, errors or bugs in the systems we use to generate operational metrics. We work on an ongoing basis to improve our controls and processes for total subscribers and other operational metrics, but errors and inconsistencies with respect to these metrics could still occur, which could negatively impact our business decisions and lead to inaccurate disclosures.

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In addition, as a public company, we are required by the Sarbanes-Oxley Act of 2002 to maintain, evaluate, test and document internal controls over financial reporting, and our multiple brands and systems make this process more complicated and costly than it would be otherwise. Any failure in the effectiveness of our system of internal control over financial reporting could have a material adverse impact on our ability to report our financial statements and/or key financial metrics in an accurate and timely manner and undermine investor confidence in the reliability of our financial statements, key financial metrics, or other public disclosures. Inaccurate and/or untimely financial statements or other disclosures could also subject us to regulatory actions, civil or criminal penalties or stockholder litigation.
Our growth may be adversely affected if we cannot continue to successfully attract, retain and motivate key employees.
Our ability to successfully pursue our growth strategy depends on our ability to attract, retain and motivate key employees across our business, particularly engineering and development employees and our senior executive team. High demand from other technology companies for skilled engineering and technical employees has made and may continue to make it challenging to retain key employees or hire replacements if they leave. In addition, candidates making employment decisions, particularly in high-technology industries, often consider the value of any equity they may receive from prospective employers. As a result, volatility or poor performance in the market price of our common stock, or concerns by potential or current employees about the performance of our stock, has and may continue to contribute to hiring and retention challenges.
We are also limited in our ability to recruit global talent for our U.S. offices by U.S. immigration laws. Work visa restrictions in the U.S. have become tighter in recent years, making it more difficult to source qualified personnel from other countries, and changes in U.S. immigration policies under the current presidential administration may further limit our ability to recruit globally.
Our current executives are not contractually obligated to remain employed by us and may leave at any time. The loss of any of these individuals could significantly delay or prevent the achievement of, or make it more difficult for us to pursue and execute on, our business objectives.
Our inability to attract and retain qualified individuals could have an adverse effect on our ability to carry out our business plans and objectives and, as a result, our ability to compete could decrease and our operating results could suffer.
We have experienced system, software, Internet, data center, network, and customer support center failures in the past. We do not yet have a disaster recovery plan that covers all of our brands, and we do not yet have a complete business continuity program. Any interruptions, delays or failures in our services could harm our reputation, cause us to lose subscribers, or result in unanticipated costs.
We must be able to maintain and operate our applications and systems without interruption. Since our ability to retain and attract subscribers depends on the performance, reliability and availability of our services, as well as on the delivery of our products and services to subscribers, even minor interruptions in our service or losses of data could harm our reputation, particularly if they frequently reoccur. Our applications, network, systems, equipment, power supplies, customer support centers and data centers are subject to various points of failure, including: human error or accidents; improper maintenance and change control; Internet connectivity downtime or disruptions in connectivity between and among systems; computer viruses; physical or electronic security breaches; inadequate systems monitoring; intentional bad acts such as sabotage, hacking, ransomware, vandalism or terrorism; pandemics; and natural disasters.
We have experienced system failures, delays and periodic interruptions in service, or outages, due to factors such as power outages and network equipment, storage system, and network configuration failures. In addition, we have experienced outages or other disruptions in the course of ongoing maintenance or when new versions, enhancements and updates to applications, software or systems are released by us or third parties. We may experience future outages that disrupt the operation of our solutions due to these or other factors.
Our systems supporting our web presence and domain segments are not fully redundant. In 2019, we built out and tested additional redundancies for a significant portion of our hosting subscribers, but we have not yet implemented equivalent redundancies across all of our web presence and domain brands. Although the redundancies we do have in place will permit us to respond, at least to some degree, to failures of applications and systems, our data centers are vulnerable in the event of failure. Most of our web presence subscribers, and a significant portion of our domain subscribers, are hosted across five U.S.-based data centers, one of which is owned by us and the rest of which are co-located, and accordingly, any failure or downtime in these data center facilities would affect a significant percentage of our subscribers. While we have a disaster recovery system that covers most of our email marketing subscribers, it is nonetheless likely to be difficult and time-consuming to recover data and services in the event of a significant outage. We do not yet have adequate structures or systems in place to recover from a data center’s severe impairment or total destruction, and recovery from the total destruction or severe impairment of any of our major data centers would be extremely difficult and may not be possible at all. Closing any of these data centers without adequate notice could result in lengthy, if not permanent, interruptions in the availability of our solutions and loss of vast amounts of subscriber data.

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Our data centers are also susceptible to impairment resulting from electrical power outages due to the amount of power and cooling they require to operate. Since we rely on third parties to provide our data centers with power sufficient to meet our needs, we cannot control whether our data centers will have an adequate amount of electrical resources necessary to meet our subscriber requirements. We attempt to limit exposure to system downtime due to power outages by using backup generators and power supplies. However, these protections may not limit our exposure to power shortages or outages entirely. We also rely on third parties to provide Internet connectivity to our data centers. If the connectivity these parties provide is discontinued, disrupted, or does not provide adequate data transmission capacity, our ability to provide services to our subscribers could be compromised.
Our customer support centers are also vulnerable in the event of failure caused by total destruction or severe impairment. The teams in each customer support center are trained to provide brand-specific support services for a discrete subset of our brands, which, along with staffing constraints and differences in software systems between our brands, limits our ability to effectively re-route calls, email and chat from one customer support center to another customer support center. Accordingly, if any of our customer support centers were to be impaired or destroyed, our ability to re-route calls, email and chat to operational customer support centers or to provide the type of customer support services that the non-operational customer support center had provided to subscribers of a particular brand or brands may be limited.
Any of these events could materially increase our expenses or reduce our revenue, damage our reputation, cause our subscribers to seek reimbursement for services paid for and not received, cause our subscribers to stop referring new subscribers to us, and cause us to lose current and potential subscribers, which would have a material adverse effect on our operating results and financial condition. Moreover, the cyber, property and business interruption insurance we carry may not have adequate coverage to compensate us fully for losses that may occur.
If we are unable to achieve or maintain a high level of subscriber satisfaction, demand for our solutions could suffer.
We believe that our future revenue growth depends on our ability to provide subscribers with quality service that meets our stated commitments, meets or exceeds our subscribers’ evolving needs and expectations and is conducive to our ability to continue to sell new solutions to existing subscribers. We are not always able to provide our subscribers with this level of service, and our subscribers occasionally encounter interruptions in service and other challenges, including as a result of outages, errors or bugs in our software or third-party software, human error, or migrations of subscribers as part of internal platform consolidation efforts. If we are unable to achieve or maintain a high level of subscriber satisfaction, we could experience higher subscriber churn, lower than expected renewal rates, disputes and litigation, or negative publicity, any of which could have a negative effect on our business, financial condition and operating results.
In addition, we may from time to time fail to meet the needs of specific subscribers in order to best meet the service expectations of our overall subscriber base. For example, we may suspend a subscriber’s website when it breaches our terms of service, harms other subscribers’ websites or disrupts servers supporting those websites, such as when a cybercriminal installs malware on a subscriber’s website without that subscriber’s authorization or knowledge. Although such service interruptions are not uncommon in a cloud-based or online environment, we risk subscriber dissatisfaction by interrupting one subscriber’s service to prevent further attacks on or data breaches for other subscribers, and this could damage our reputation and have an adverse effect on our business.
Security incidents, privacy breaches or fraud may harm our business.
We collect, handle, store and transmit large amounts of sensitive, confidential, personal and proprietary information, including payment card information and information we receive from or maintain on behalf of our subscribers. Unauthorized access to, use of, or loss of this type of information and any compromise of our networks, systems, or applications may cause damage to our platforms, service interruptions to our subscribers, loss of subscriber websites and data, or harm to our reputation and may result in increased security costs, distraction of our management team, litigation, regulatory investigations or other direct or indirect expense or liabilities. These types of incidents can result from numerous sources, including: physical or electronic security breaches; viruses, ransomware or other malware; hardware vulnerabilities; accident or human error by our own personnel or those of our partners; criminal activity or malfeasance (including by our own personnel); fraud or impersonation scams perpetrated against us; or security events impacting our third-party service providers. We have experienced security events such as these in the past and expect they will continue in the future. To date, we do not believe that any of these events has had a material effect on us, but we may experience larger and more serious incidents in the future.
In addition, many states and countries in which we have subscribers have enacted regulations requiring us to notify governmental authorities, regulators and subscribers in the event that certain systems are compromised, or subscriber information is accessed or acquired (or believed to have been accessed or acquired) without authorization, and in some cases also develop proscriptive policies to protect against such unauthorized access or acquisition. Such notifications can result in private causes of action being filed against us, or government investigations into the adequacy of security controls or handling of any security event. Should we experience a loss of protected data or a disruption in the availability or integrity of our

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services or data we store for subscribers, efforts to respond to the incident and enhance our controls, as well as potential penalties imposed by regulators or damages awarded to private plaintiffs, could increase our costs.
Organizations generally, and Internet-based organizations in particular, are vulnerable to targeted attacks aimed at exploiting network and system applications or weaknesses, causing damage or disruption, or obtaining ransom payments. Techniques used to obtain unauthorized access to, or to sabotage, networks and systems often are not recognized until launched against a target. Cyber criminals use advanced and quickly-evolving tactics, including evasive applications, proxies, tunneling, encryption techniques, vulnerability exploits, buffer overflows, distributed denial of service attacks, or DDoS attacks, and botnets. For example, from time to time we are targeted by DDoS attacks in which attackers attempt to block access to our websites or our subscribers' websites, as well as attempts to place illegal or abusive content on our or our subscribers' websites. If we are unable to avert a DDoS or other attack for any significant period, we could sustain substantial revenue loss from lost sales and subscriber dissatisfaction.
Cyber-attacks may target us, our subscribers, our partners, banks, credit card processors, delivery services, e-commerce in general or the communication infrastructure on which we depend. As security threats evolve and become more sophisticated and more difficult to detect and defend against, a hacker or thief may defeat our security measures, or those of our third-party service providers, partners, or vendors, and obtain confidential or personal information. We or the third party may not discover the security breach and theft of information for a significant period of time after the breach occurs. We may need to expend significant resources to protect against security breaches and thefts of data or to address problems caused by breaches or thefts, and we may not be able to, or may fail to, anticipate cyber-attacks or implement adequate preventative measures. In addition, we rely on third parties to provide physical security for our facilities, including data centers. Any physical breach of security could result in unauthorized access or damage to our systems.
Our employees, including our employee and contract support agents are often targeted by, and may be vulnerable to a variety of social engineering attacks, such as e-mail scams, phishing, and/or similar attack tactics used to perpetrate fraud. We have experienced and may in the future experience security attacks that cause our support agents to divulge confidential information about us or our subscribers, or to introduce viruses, worms or other malicious software programs onto their computers, allowing the perpetrators to, among other things, gain access to our systems or our subscribers’ accounts. Our subscribers have in the past, and may in the future, use weak passwords, accidentally disclose their passwords or store them on a mobile device that is lost or stolen, or otherwise compromise or fail to ensure the security of their data, creating the perception that our systems are not secure against third-party access when their accounts are compromised and used maliciously by third parties. In addition, if third parties with which we work, such as vendors, partners or developers, violate applicable laws or our policies or disclose our confidential information due to human error or technical issues, such violations or incidents may also put our information and our subscribers’ information at risk and could in turn have an adverse effect on our business and reputation.
If an actual or perceived security breach occurs, the market’s perception of our security measures could be harmed and we could lose sales and current and potential subscribers. In addition, in the past, security specialists or "white hat" hackers have found and publicized security vulnerabilities in our platforms, and this may occur again in the future. This type of publicity could harm our reputation, even if we correct the vulnerabilities before they have actually been exploited. We might also be required to expend significant capital and resources to investigate, protect against or address breaches and remediate vulnerabilities. Any significant violations of data security could result in the loss of business, litigation and regulatory investigations and penalties that could damage our reputation and adversely affect our operating results and financial condition. Furthermore, if a high profile security breach occurs with respect to another provider of cloud-based technologies or online marketing tools, our subscribers and potential subscribers may lose trust in the security of these business models generally, which could harm our ability to retain existing subscribers or attract new ones. We cannot guarantee that any backup systems, regular data backups, security protocols, network protection mechanisms and other procedures currently in place, or that may be in place in the future, will be adequate to prevent network and service interruption, system failure, damage to one or more of our systems or data loss in the event of a security breach or attack on our network.
If we do not maintain a low rate of credit card chargebacks, protect against breach of the credit card information we store and comply with payment card industry standards, we will face the prospect of financial penalties and could lose our ability to accept credit card payments from subscribers, which would have a material adverse effect on our business, financial condition and operating results.
A majority of our revenue is processed through credit card transactions. Under current credit card industry practices, we are liable for fraudulent and disputed credit card transactions because we do not obtain the cardholder’s signature at the time of the transaction, even though the financial institution issuing the credit card may have authorized the transaction. Although we attempt to keep our rate of credit card refunds and chargebacks low, our credit card processors have in the past and could in the future impose fines on us as a result of increased refunds and chargebacks. In addition, if our refunds or chargebacks increase in the future, our credit card processors could require us to maintain or increase reserves, increase our processing fees, terminate

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their contracts with us or decline to serve as credit card processors for new joint ventures or brands, which would have an adverse effect on our financial condition.
We could also incur significant fines or lose our ability to process payments using credit cards if we fail to follow payment card industry data security standards, or PCI DSS, even if there is no compromise of subscriber information. In the past, we have identified control gaps in our adherence to PCI DSS in certain of our brands, and any failure to achieve or maintain compliance with PCI DSS across our various brands could have negative consequences. In this event, we may incur financial penalties, our payment networks may increase the processing fees they charge to us, or we may lose our ability to process credit cards, any of which could have a material adverse effect on our financial results. In addition, we may have difficulty negotiating competitive rates with payment networks for as long as the noncompliance persists.
From time to time, fraudulent transactions conducted on our websites (such as through the use of stolen credit card numbers) have been above levels consistent with credit card association guidelines. This has sometimes resulted, and may in the future result, in third-party audit requirements and additional expense to change our processes to reduce fraud. It could also subject us to liability or require us to increase reserves with our credit card processors. Under credit card association rules, penalties may be imposed at the discretion of the association. Any such potential penalties would be imposed on our credit card processors by the credit card association. Under our contracts with our credit card processors, we are required to reimburse the credit card processors for such penalties. Although we believe that our current level of fraud monitoring is adequate, we face the risk that we may fail to maintain an adequate level of fraud monitoring in the future, or that one or more credit card associations may, at any time, assess penalties against us or terminate our ability to accept credit card payments from subscribers, which would have a material adverse effect on our business, financial condition and operating results.
In addition, we could be liable if there is a breach of the credit card or other payment information we store. Online commerce and communications depend on the secure transmission of confidential information over public networks. We rely on encryption and authentication technology that we have developed internally, as well as technology that we license from third parties, to provide security and authentication for the transmission of confidential information, including subscriber credit card numbers. However, we cannot ensure that this technology can prevent breaches of the systems that we use to protect subscriber credit card data. Although we maintain network security insurance, we cannot be certain that our coverage will cover, in whole or in part, liabilities actually incurred or that insurance will continue to be available to us on reasonable terms, or at all. In addition, some of our third-party partners also collect information from transactions with our customers, and we may be subject to litigation or our reputation may be harmed if our partners fail to protect our subscribers’ information or if they use it in a manner that is inconsistent with our practices.
Data breaches can also occur as a result of non-technical issues. Under our contracts with our card processors, if there is unauthorized access to, or disclosure of, credit card information that we store, we could be liable to the credit card issuing banks for their cost of issuing new cards and related expenses.
Our quarterly and annual operating results may be adversely affected due to a variety of factors, which could make our future results difficult to predict and could cause our operating results to fall below investor or analyst expectations.
Our quarterly and annual operating results and key metrics have varied from period to period in the past, and we expect they may continue to fluctuate as a result of a number of factors, a number of which are outside of our control, including:
our ability to cost-effectively attract, retain, and increase sales to subscribers;
the impact of competition;
the timing and success of introductions of new products or product enhancements;
the amount and timing of our marketing expenditures;
the amount and timing of capital expenditures or extraordinary expenses, such as litigation, regulatory or other dispute-related settlement payments;
the mix of products we sell;
higher than expected refunds to our subscribers;
systems, data center and Internet failures, breaches and service interruptions;
negative publicity about us or our brands;
loss of key employees or difficulties recruiting new employees;
the impact of changes in legislation or regulations, or to interpretations of existing legislation and regulations;
litigation or governmental enforcement actions against us due to actual or alleged failures to comply with applicable laws or regulations;
failures to comply with industry standards such as the payment card industry data security standards;
changes in our effective tax rate, our misinterpretation of domestic and international tax laws and regulations, or adverse outcomes from regulatory examinations of our income tax and other tax returns;
interest rate fluctuations;
goodwill and other intangible asset impairments;

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terminations of, disputes with, or material changes to our relationships with third-party partners; and
costs, integration problems, or other liabilities associated with past or future acquisitions, strategic investments or joint ventures.
Our financial or operating results in future reporting periods may fall below the expectations of the public market, investors, or analysts due to one or more of the factors above or for other reasons, which could cause our stock price to decline substantially.
Our business depends on establishing and maintaining strong brands. If we are not able to effectively promote our brands, or if the reputation of our brands is damaged, our ability to expand our subscriber base will be impaired and our business and operating results will be harmed.
We market our solutions through various brands, including our key brands Bluehost, HostGator, Domain.com, and Constant Contact.
We believe that establishing and maintaining our key brands is critical to our efforts to expand our subscriber base. If we do not build awareness of our key brands, we could be at a competitive disadvantage to companies whose brands are, or become, more recognizable than ours. For instance, we believe that our business has been, and may continue to be, affected by the increasing tendency of consumers to search for web presence and online marketing solutions using brand related search terms as opposed to unbranded search terms such as hosting, website builders or email marketing. We believe this trend has benefited competitors who have invested more heavily than we have in building brand awareness, and who have used a broader array of marketing channels to do so, in contrast to our historical focus on marketing through online advertising, online directories, and referral partners.
To attract and retain subscribers and to promote and maintain our brands in response to competitive pressures, we may have to substantially increase our financial commitment to creating and maintaining brand loyalty among subscribers. Improving our brand awareness may be challenging because we have multiple key brands rather than a single flagship brand, and because a number of our competitors have invested heavily in their brands in the past and may be able to devote more resources than we can to brand awareness going forward.
In addition, if subscribers, as well as our third-party referral marketing, distribution and reseller partners, do not perceive our existing solutions to be reliable and of high quality, if we introduce new services or enter into new business ventures that are not favorably received by such parties, or if our brands become associated with any fraudulent or deceptive conduct on the part of our subscribers, the value of our brands could be diminished, thereby decreasing the attractiveness of our solutions to such parties. As a result, our operating results may be adversely affected by decreased brand recognition and harm to our reputation.
The rate of growth of the SMB market for our solutions could be significantly lower than our estimates. The success of our products depends on the expansion and reliability of the Internet infrastructure and the continued growth and acceptance of email as a communications tool. If demand for our products and services does not meet expectations, our ability to generate revenue and meet our financial targets could be adversely affected.
The rate of growth of the SMB market may not meet our expectations, which would adversely affect our business. Our expectations for future revenue trends are based in part on assumptions reflecting our industry knowledge and experience serving SMBs, as well as our assumptions regarding demographic shifts, growth in the Internet infrastructure internationally and macroeconomic conditions. However, SMB spending patterns are difficult to predict and are sensitive to the general economic climate, the economic outlook specific to SMBs and overall consumer confidence, which makes it difficult to forecast market trends accurately. If any of our assumptions regarding the SMB market proves to be inaccurate, our revenue could be significantly lower than expected.
Our ability to compete depends on our ability to offer products and services that enable our subscribers to establish, manage and grow their businesses. Our web presence and commerce offerings are predicated on the assumption that an online presence will continue to be an important factor in our subscribers’ abilities to establish, expand, manage and monetize their businesses affordably. If we are incorrect in this assumption, for example due to the introduction of a new technology or industry standard (or evolution of existing technology such as social media or voice assistant software) that supersedes the importance of an online presence or renders our existing or future solutions obsolete, then our ability to retain existing subscribers and attract new subscribers could be adversely affected, which could harm our ability to generate revenue and meet our financial targets.
The future success of our email marketing solution depends on the continued widespread use of email as a primary means of communication. Security problems such as viruses, worms, and other malicious programs, reliability issues arising from outages and damage to the Internet infrastructure, or publicity about leaked emails of high-profile users could create the perception that email is not a safe and reliable means of communication. Use of email by businesses and consumers also depends on the ability of email providers to prevent unsolicited bulk email, or “spam,” from overwhelming consumers’

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inboxes. If security problems become widespread or frequent or if email providers cannot effectively control spam, the use of email as a means of communication may decline as consumers find alternative ways to communicate. We could also be harmed if, in an attempt to limit unsolicited email, email providers restrict or limit emails sent by our customers using our email marketing solution. In addition, if alternative communications tools, such as social media, or ephemeral or text messaging, continue to gain widespread acceptance, the need for email may decrease. Any of these events could materially increase our expenses or reduce demand for our email marketing solution and harm our business.
Our success depends in part on our strategic relationships and partnerships or other alliances with third parties.
We rely on third-party relationships and alliances, such as with referrers and promoters of our brands and solutions, as well as with our providers of solutions and services that we offer to subscribers. If any of the third parties on which we rely fails to perform as expected, breaches or terminates their agreement with us, or becomes engaged in a dispute with us, our reputation could be adversely affected and our business could be harmed.
We rely on third-party referral partners and other marketing partners to acquire subscribers. If these partners fail to promote our brands or to refer new subscribers to us, begin promoting competing brands in addition to or instead of ours, fail to comply with regulations, are forced to change their marketing practices in response to new or existing regulations or cease to be viewed as credible sources of information by our potential subscribers, we may face decreased demand for our solutions, higher than expected subscriber acquisition costs, and loss of revenue. For instance, in the past, we were impacted when an important referral source began featuring competing web hosting brands on their website, rather than just our brand. It is possible that in the future, this referral source or another, similar referral source will continue to add competing web hosting options or even remove us as an option, which could have a negative impact on us.
Our ability to offer domain name services to our subscribers depends on certain third-party relationships. For example, certain of our subsidiaries are accredited by ICANN and various domain name registries as a domain name registrar. If we fail to comply with domain name registry requirements, or if domain name registry requirements change, we could lose our accreditation, be required to increase our expenditures, comply with additional requirements or alter our service offerings, any of which could have a material adverse effect on our business, financial condition or results of operations. In addition, the requirements of ICANN and other domain registries are not consistent with some aspects of the GDPR or other privacy laws, which could make compliance with these requirements infeasible or more costly and complicated than they would be otherwise.
We rely on software licensed from or hosted by third parties to offer certain of our solutions to our subscribers. We also have relationships with product partners whose solutions, including shopping carts and security tools, we integrate with our products and offer to our subscribers. In our web presence segment, we use third party web hosting control panels, which allow our hosting customers to manage their websites, for several of our strategic brands. In our email marketing segment, we rely on some of our partners to create integrations with third-party applications and platforms used by our subscribers. We may be unable to continue our relationship with any of these partners or third parties if, for example, they decline to continue to work with us or are acquired. In such an event, we may not be able to continue to offer these third-party tools to our subscribers or we may be forced to find an alternative that may be inferior to or more costly than the solution that we had previously offered. We currently face, and expect to face from time to time in the future, pricing or other disputes with our third party partners and licensors, which may disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs and/or costs to our customers.  Although the results of any such disputes, whether current or future, cannot be predicted with certainty, the final outcome could adversely affect our business, financial condition, and operations.   
We may also need to obtain future licenses from third parties to use intellectual property associated with the development of our solutions, which might not be available to us on acceptable terms, or at all. Any loss of the right to use any software or other intellectual property required for the development and maintenance of our solutions could result in delays in the provision of our solutions until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business and operating results.
The international nature of our business exposes us to business risks that could limit the effectiveness of our growth strategy and cause our operating results to suffer.
We currently maintain offices and workforces, and conduct operations, primarily in the United States, Brazil, India and the Netherlands and have third-party support arrangements in India, the Philippines and China. Conducting operations in international markets or establishing international locations subjects us to challenges that we have not generally faced in the United States, including:
adapting our solutions and marketing practices to international markets, including translation into foreign languages;
compliance with foreign laws, including more stringent laws in foreign jurisdictions relating to consumer privacy and protection, collection and use of data obtained from individuals and other third parties;

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difficulties in collecting payments from subscribers or in automatically renewing their contracts with us, especially due to the more limited availability and popularity of credit cards in certain countries;
greater difficulty in enforcing contracts, including our terms of service and other agreements;
management, communication, compliance and integration problems resulting from cultural or language differences and geographic dispersion;
sufficiency of qualified labor pools and greater influence of organized labor in various international markets;
compliance by our employees, business partners and other agents with anti-bribery laws (including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in India, Brazil and other jurisdictions where we do business), economic sanction laws and regulations, export controls, and other U.S., foreign and local laws and regulations regarding international and multi-national business operations;
potentially adverse tax consequences, including the complexities of foreign value added tax (or sales, service, use or other tax) systems, and our failure to comply with all relevant foreign tax rules and regulations due to our lack of familiarity with the jurisdiction’s tax laws or unexpected or aggressive tax positions taken by foreign tax authorities;
restrictions and withholdings on the repatriation of earnings;
foreign currency exchange risk;
uncertain political, regulatory and economic climates in some countries, which could result in unpredictable or frequent changes in applicable regulations or in the general business environment that could negatively impact us; and
reduced protection for intellectual property rights in some countries.
In addition, our ability to expand internationally and attract and retain non-U.S. subscribers may be adversely affected by concerns about the extent to which U.S. governmental and law enforcement agencies may obtain data about our subscribers, and by privacy laws in other jurisdictions (such as the GDPR) that are generally more protective of subscriber data than U.S. law. Non-U.S. subscribers may decide that the privacy risks of storing data with a U.S.-based company outweigh the benefits and opt to seek solutions from a company based outside of the United States. In addition, certain foreign governments require local storage of their citizens’ data. If we become subject to such requirements, it may require us to increase the number of non-U.S. data centers or servers we maintain, increase our costs or adversely affect our ability to attract, retain or cost-effectively serve non-U.S. subscribers.
Acquisitions, joint ventures and other strategic investments may not achieve the intended benefits or may disrupt our current plans and operations.
Acquisitions have historically been an important component of our growth strategy. We have acquired the businesses and assets of numerous other companies, including the acquisition of Constant Contact in February 2016. We have also made strategic investments in and entered into joint ventures with third parties, typically with small companies focused on developing or marketing products that may complement our own. We may complete transactions of this type in the future. These transactions involve numerous risks, including the following:
difficulties or delays in integrating the acquired businesses, which could prevent us from realizing the anticipated benefits of acquisitions;
reliance on third parties for transition services prior to subscriber migration;
difficulties in supporting and migrating acquired subscribers, if any, to our platforms, which could cause subscriber churn, unanticipated costs, and damage to our reputation;
disruption of our ongoing business and diversion of management and other resources from existing operations;
the incurrence of additional debt or the issuance of equity securities, resulting in dilution to existing stockholders, in order to fund an acquisition;
assumption of debt or other actual or contingent liabilities of the acquired company, including litigation risk;
differences in corporate culture, compliance protocols, and risk management practices between us and acquired companies;
potential loss of the key employees of an acquired business;
potential loss of the subscribers or partners of an acquired business due to the actual or perceived impact of the acquisition;
difficulties associated with governance, management and control matters in majority or minority investments or joint ventures;
unforeseen or undisclosed liabilities or challenges associated with the companies, businesses or technologies we acquire;
adverse tax consequences, including exposure of our entire business to taxation in additional jurisdictions; and
accounting effects, including potential impairment charges and requirements that we record deferred revenue at fair value.

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Any of these risks could result in our acquisitions disrupting our business and/or failing to achieve their intended objectives.
We have a history of losses and may not be able to achieve or maintain profitability.
We had a net loss in each year since inception through 2017. Although we reported net income for fiscal year 2018, we reported a net loss for fiscal year 2019 and we may not be able to achieve or maintain profitability in the future. We had a net loss attributable to Endurance International Group Holdings, Inc. of $107.3 million for fiscal year 2017, net income of $4.5 million for fiscal year 2018, and net loss of $12.3 million for fiscal year 2019.
We have made and expect to continue to make significant expenditures to maintain, develop, improve and expand our business, and we may not be able to maintain profitability in light of our expenditure levels. We may incur significant losses in the future if we are unable to increase subscriber and revenue growth to cover these expenditures or for a number of other reasons, including interest expense related to our substantial indebtedness, amortization expense associated with past or potential future acquisitions, and the other risks described in this report.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and if our tax positions are examined by tax authorities, we could be obligated to pay additional taxes in various jurisdictions.
As a multinational organization with a digital and Internet-based business, we may be subject to direct and indirect taxation in multiple jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we collect or pay in these jurisdictions could increase substantially with changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and operating results.
Governments are increasingly focused on ways to increase tax revenues, which has contributed to an increase in audit activity and more aggressive positions taken by tax authorities. Any additional taxes or other assessments by tax authorities may be in excess of our current tax provisions or may require us to modify our business practices in order to reduce our exposure to additional taxes going forward, any of which could have a material adverse effect on our business, results of operations and financial condition.
Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to levy additional or new sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce. Changes in tax laws, such as tax reform in the United States or changes in tax laws resulting from the Organization for Economic Co-operation and Development’s multi-jurisdictional plan of action to address base erosion and profit shifting, could impact our effective tax rate.
We may need additional equity, debt or other financing in the future, which we may not be able to obtain on acceptable terms, or at all, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders.
We may need to raise funds in the future, for example, to develop new technologies, expand our business, respond to competitive pressures, acquire businesses, or respond to unanticipated situations. Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, interest rates, our operating performance, and investor interest. In addition, incurring additional debt may not be permitted under our credit agreement or indenture governing our 10.875% senior notes due 2024 (which we refer to as the "Senior Notes"), or may require lender or noteholder consent. As such, additional funding may not be available to us on acceptable terms or at all.
If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, foregoing acquisitions or reducing our product development efforts. If we succeed in raising additional funds through the issuance of equity or convertible securities, then the issuance could result in substantial dilution to existing stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of the holders of our common stock. In addition, any preferred equity issuance or debt financing that we may obtain in the future could have restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. To the extent any such new indebtedness is secured and is at higher interest rates than on our existing first lien term loan facility, the interest rates on our existing first lien term loan facility could increase as a result of the “most-favored nation” pricing provision in our existing credit agreement. Further, to the extent that we incur additional indebtedness or such other obligations, the risks associated with our substantial leverage described elsewhere in this report, including our possible inability to service our debt, would increase.

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We rely on data centers to deliver our services. If we are unable to renew our data center agreements on favorable terms, or at all, our business could be adversely affected. In addition, our ownership of our largest data center subjects us to potential costs and risks associated with real property ownership.
We currently serve most of our subscribers from six data center facilities located in Massachusetts (three), Texas (two), and Utah (one). We own the Utah data center and occupy the remaining data centers pursuant to co-location service agreements with third-party data center facilities which have built and maintain the co-located data centers for us and other parties. Although we own the servers in these data centers and engineer and architect the systems upon which our platforms run, we do not control the operation of the facilities we do not own.
The terms of our existing co-located data center agreements vary in length and expire on various dates through 2026. The owners of these or our other co-located data centers have no obligation to continue such arrangements beyond their current terms, nor are they obligated to renew their agreements with us on terms acceptable to us, or at all. These agreements may not provide us with adequate time to transfer operations to a new facility in the event of early termination. If we were required to move our equipment to a new facility without adequate time to plan and prepare for such migration, we would face significant challenges due to the technical complexity, risk and high costs of the relocation. Any such migration could result in downtime or other disruptions to our services, which could damage our reputation, cause subscriber losses and harm our operating results and financial condition.
If we are able to renew the agreements on our existing co-located data center facilities, the lease rates may be higher than those we pay under our existing agreements. In addition, the complexities and risks of data center migrations, even when we have adequate time to plan for them, can sometimes make it impractical to leave our current data center facilities, even when we may be able to obtain economic or other terms with a new data center provider that would be better for us over the long term. If we fail to increase our revenue by amounts sufficient to offset any increases in lease rates for our existing data center facilities, or cannot take advantage of potentially better terms with new data center providers because of migration challenges, our operating results may be materially and adversely affected.
With respect to the data center facility that we own, we are subject to risks, and may incur significant costs, related to our ownership of the facility and the land on which it is located, including costs or risks related to building repairs or upgrades and compliance with various federal, state and local laws applicable to real property owners, including environmental laws.
If our solutions and software contain serious errors or defects, or if human error on our part results in damage to our subscribers’ businesses, then we may lose revenue and market acceptance and may incur costs to defend or settle claims.
Complex technology platforms, software applications and systems such as ours often contain errors or defects, such as errors in computer code, vulnerabilities or other systems errors, particularly when first introduced or when new versions, enhancements or updates are released. Because we also rely on third parties to develop many of our solutions, our products and services may contain additional errors or defects as a result of the integration of the third party’s product. Despite quality assurance measures, internal testing and beta testing by our subscribers, we cannot guarantee that our current and future solutions will be free of serious defects, which could result in lost revenue or a delay in market acceptance. Such errors in computer code, vulnerabilities or other system errors have in the past and may in the future result in performance issues, loss of data, loss or fraudulent transfers of customer domain names, data breaches, malware outbreaks, DDoS attacks staged by using our resources, and other issues. To date, we do not believe that any of these errors has had a material effect on us, but we may experience larger and more serious incidents in the future.
Since our subscribers use our solutions to, among other things, maintain an online presence for their business, it is not uncommon for subscribers to allege that errors, defects, or other performance problems result in damage to their businesses. They could elect to cancel or not to renew their agreements, delay or withhold payments to us, or bring claims or file suit seeking significant compensation from us for the losses they or their businesses allege to have suffered. For instance, from time to time, we have inadvertently deleted subscriber data due to human error, technical problems or miscommunication with customers. These lost data cases have sometimes led to subscribers commencing litigation against us, settlement payments to subscribers, subscription cancellations, and negative social media attention. Although our subscriber agreements typically contain provisions designed to limit our exposure to specified claims, including data loss claims, existing or future laws or unfavorable judicial decisions could negate or diminish these limitations. Even if not successful, defending against claims brought against us can be time-consuming and costly and could seriously damage our reputation in the marketplace, making it harder for us to acquire and retain subscribers.
Because we are required to recognize revenue for our subscription-based services over the term of the applicable subscriber agreement, changes in our sales may not be immediately reflected in our operating results. In addition, we may not have adequate reserves in the event that our historical levels of refunds increase, which could adversely affect our liquidity and profitability.

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We recognize revenue from our subscribers ratably over the respective terms of their agreements with us in accordance with U.S. generally accepted accounting principles. These contracts are generally for service periods of up to 36 months. Accordingly, increases in sales during a particular period do not translate into corresponding increases in revenue during that same period, and a substantial portion of the revenue that we recognize during a quarter is derived from deferred revenue from our agreements with subscribers that we entered into during previous quarters. As a result, we may not generate net earnings despite substantial sales activity during a particular period. Conversely, the existence of substantial deferred revenue may prevent deteriorating sales activity from becoming immediately apparent in our reported operating results.
In connection with our domain registration services, as a registrar, we are required under our agreements with domain registries to prepay the domain registry for the term for which a domain is registered. We recognize this prepayment as an asset on our consolidated balance sheet and record domain revenue and the domain registration expense ratably over the term that a domain is registered. This cash payment to the domain registry may lead to fluctuations in our liquidity that are not immediately reflected in our operating results.
In addition, our standard terms of service permit our subscribers to seek refunds from us in certain instances, and we maintain reserves to provide such refunds. The amount of such reserves is based on the amount of refunds that we have provided in the past. If our actual level of refund claims exceeds our estimates and our refund reserves are not adequate to cover such claims, our liquidity or profitability could be adversely affected. Furthermore, if we experience an unexpected decline in our revenue, we may not be able to adjust spending in a timely manner to compensate for such shortfall, and any significant shortfall in revenue relative to planned expenditures could adversely affect our business and operating results.
We are subject to numerous laws and regulations, including those described in Part I, Item 1, Business under the heading “Laws and Regulations.” Our actual or perceived failure to comply with laws and regulations could harm our business, and new or modified laws or regulations could reduce demand for our products or require us to change our products, our operations or our marketing, market research and advertising practices in ways that negatively affect us.
Any failure by us to comply with applicable laws or regulations, including (among others) those described in Part I, Item 1, Business may result in a range of negative consequences, including: regulatory investigations; governmental enforcement actions; requirements that we change our marketing or other business practices in a manner unfavorable to us; litigation (including potential class action litigation); fines and penalties; or negative publicity. Any of these consequences could have an adverse effect on our reputation and business.
In addition, compliance with new laws or regulations, or modifications to existing laws or regulations, could impair our ability to retain or attract subscribers, reduce demand for our products, or increase our cost of doing business. For example:
Anti-spam laws that require that our subscribers’ customers have the ability to opt out of receiving commercial emails, or "opt-in" rules that require them to affirmatively elect to receive commercial emails, may reduce the effectiveness of our products and marketing efforts, particularly Constant Contact’s email marketing solution.
Consumer protection laws or regulations requiring us to obtain additional consents from subscribers or to provide them with additional disclosures in order to be permitted to automatically renew their subscriptions, or to automatically enroll them into paid subscriptions after a free trial period, could impair our ability to retain or attract subscribers and increase the potential for civil liability under consumer protection laws.
Further regulation of cookies, web beacons and similar technology for online behavioral advertising (such as the consent requirements for cookies and similar technologies established by the GDPR or the opt-out requirements established by the CCPA) may lead to broader restrictions on our collection and use of online usage information in order to attract and retain customers. Such regulation may also restrict collection of the data from our subscribers' customers and contacts as well as how we may use this data. This could impair our ability to collect, transfer and/or use information that we use to provide targeted advertising to our subscribers or to assist our subscribers in marketing to their own customers, which could negatively affect our ability to maintain and grow our subscriber base.
Privacy laws requiring that certain data associated with domain name registration be kept private (including, for example, requirements that prohibit publishing the identity of a party registering a domain name) could reduce our revenue from sales of domain privacy products, since consumers in the jurisdictions where these laws apply would no longer need to purchase these products to maintain the privacy of their data.
The adoption of any laws or regulations adversely affecting the growth, popularity, accessibility or use of the Internet, including laws impacting Internet neutrality (such as the 2015 repeal of U.S. Internet neutrality regulations) or new tax regulations or court decisions concerning the taxation of online commerce, could decrease the demand for our products, require us to make modifications to our products, or increase our operating costs.
We rely on third parties to carry out a number of services for us, including processing personal data on our behalf. While we enter into contractual arrangements to help ensure that these parties only process such data according to our instructions and have sufficient security measures in place, any security breach or non-compliance with our contractual terms or breach of

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applicable law by such third parties could result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our subscribers to lose trust in us. In particular, under certain circumstances, we may be considered liable for non-compliance by our third-party partners under the GDPR, the CCPA or other privacy laws and regulations. We also use third parties to provide marketing and advertising of our products and services, and we could be liable for, or face reputational harm as a result of, their marketing practices if, for example, they fail to comply with applicable statutory and regulatory requirements. These or similar instances of noncompliance by our third-party partners could have an adverse impact on our reputation and business.
Failure to adequately protect and enforce our intellectual property rights could substantially harm our business and operating results.
In order to protect our intellectual property, proprietary technologies and processes, we rely upon a combination of trademark, patent and trade secret law, as well as confidentiality procedures and contractual restrictions. These afford only limited protection, may not prevent disclosure of confidential information, and may not provide an adequate remedy in the event of misappropriation or unauthorized disclosure. Despite our efforts to protect our intellectual property rights, unauthorized parties, including employees, subscribers and third parties, have made, and in the future may make, unauthorized or infringing use of our brand names, products, services, software and other functionality, in whole or in part, or obtain and use information that we consider proprietary.
Policing our proprietary rights and protecting our brands and domain names is difficult and costly and may not always be effective. In addition, we may need to enforce our rights under the laws of countries that do not protect proprietary rights to as great an extent as do the laws of the United States and any changes in, or unexpected interpretations of, the intellectual property laws in any country in which we operate may compromise our ability to enforce our intellectual property rights.
Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary to enforce our intellectual property rights or to defend against claims of infringement or invalidity. Such litigation or proceedings could be costly, time-consuming and distracting to our management, result in a diversion of resources, the impairment or loss of portions of our intellectual property, and have a material adverse effect on our business and operating results.
We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.
There is significant litigation in the United States and abroad involving patents and other intellectual property rights. Companies providing Internet-based products and services are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights. The risk of patent litigation has been amplified by the increase in certain third parties, so-called “non-practicing entities,” whose sole business is to assert patent claims and against which our own intellectual property portfolio may provide little deterrent value.
We could incur substantial costs in prosecuting or defending any intellectual property litigation and we have incurred such costs in the past. If we sue to enforce our rights or are sued by a third party that claims that our solutions infringe its rights, the litigation could be expensive and could divert our management’s time and attention. Even a threat of litigation could result in substantial expense and time. In addition, some of our agreements with partners and others require us to indemnify those parties for third-party intellectual property infringement claims, which would increase the cost to us resulting from an adverse ruling on any such claim.
Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:
cease selling or using solutions that incorporate the intellectual property that our solutions allegedly infringe;
make substantial payments for legal fees, settlement payments or other costs or damages;
obtain a license or enter into a royalty agreement, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or
redesign the allegedly infringing solutions to avoid infringement, which could be costly, time-consuming or impossible.
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us, our business or operating results could be harmed.
In addition, many companies are devoting significant resources to obtaining patents that could affect many aspects of our business, and our competitors and others may have significantly larger and more mature patent portfolios than we have. Since we do not have, and are not attempting to develop, a significant patent portfolio, this may prevent us from deterring patent infringement claims as well as limit our ability to develop product enhancements that are similar to patented third-party technology.
Our use of “open source” software could adversely affect our ability to sell our services and subject us to possible litigation.

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We use open source software in providing a substantial portion of our solutions, and we may incorporate additional open source software in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to certain conditions, including requirements that we offer our solutions that incorporate the open source software for no cost; that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software; and/or that we license such modifications or derivative works under the terms of the particular open source license. In addition, if a third-party software provider has incorporated open source software into software that we license from such provider, we could be required to disclose any of our source code that incorporates or is a modification of such licensed software. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software, and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our solutions. In addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Such litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products.
We could face liability, or our reputation might be harmed, as a result of the activities of our subscribers, the content of their websites, the data they store on our servers or the emails that they send.
We could face liability or incur other costs as a result of the activities of our subscribers. Although the statutes discussed in Part I, Item 1, Business (including the DMCA and the CDA) and case law in the United States have generally shielded us from liability for subscriber activities to date, court rulings in pending or future litigation, or future legislative or regulatory actions, may narrow the scope of protection afforded us under these laws. Several court decisions and the enactment of FOSTA arguably have already narrowed the scope of the immunity provided to interactive computer services in the United States under the CDA. In addition, laws governing an Internet service provider's role in monitoring subscriber activities are unsettled in many international jurisdictions, or may prove difficult or impossible for us to comply with in some international jurisdictions. Also, notwithstanding the exculpatory language of these bodies of law, we may be embroiled in complaints and lawsuits which, even if ultimately resolved in our favor, add cost to our doing business and may divert management’s time and attention. Finally, other existing bodies of law, including the criminal laws of various states, may be deemed to apply or new statutes or regulations may be adopted in the future, any of which could expose us to further liability and increase our costs of doing business.
We may face liability in connection with ownership or control of subscriber accounts, domain names or email contact lists or in connection with domain names we own.
As a provider of cloud-based solutions, including as a registrar of domain names and related services, we have faced and may continue to face liability or costs related to ownership or control of subscriber accounts, websites, domain names or email contact lists, or in connection with domain names we own, including the following:
Our failure to renew a subscriber’s domain name or for our role in the wrongful transfer of control or ownership of accounts, websites or domain names;
Other forms of account, website or domain name “hijacking,” including misappropriation by third parties of subscriber accounts, websites or domain names;
Trademark infringement if one or more domain names in our domain name portfolios that we own and provide for resale is alleged to violate another party’s trademark;
Infringement of third party trademarks or copyrights if advertisements displayed on websites associated with domains registered by us contain allegedly infringing content placed by third parties; and
Providing the identity and contact details of a domain name registrant who has purchased our domain privacy service, or who has rights preventing disclosure of such information under the GDPR, even though our terms of service reserve the right to provide the underlying WHOIS information and/or to cancel privacy services on domain names in certain circumstances.
Occasionally a subscriber may register a domain name that is identical or similar to another party’s trademark or the name of a living person. Disputes involving registration or control of domain names are often resolved through the Uniform Domain Name Dispute Resolution Policy, or UDRP, ICANN’s administrative process for domain name dispute resolution, or through litigation under the Anticybersquatting Consumer Protection Act, or ACPA, or under general theories of trademark infringement or dilution. The UDRP generally does not impose liability on registrars, and the ACPA provides that registrars may not be held liable for registering or maintaining a domain name absent a showing of bad faith, intent to profit or reckless disregard of a court order by the registrar. However, we may face liability if we fail to comply in a timely manner with procedural requirements under these rules. In addition, these processes typically require involvement by us and, therefore, could result in increased costs for us.

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We are subject to export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Our business activities are subject to various restrictions under U.S. export controls and trade and economic sanctions laws, including the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, which prohibit certain transactions with U.S. embargoed or sanctioned countries, governments, persons and entities. These laws and regulations, and the targets of U.S. sanctions, are subject to change, including without advance notice.
Although we take precautions and have implemented, and continue to seek to enhance, compliance measures to prevent transactions with U.S. sanction targets, from time to time we have identified, and we expect to continue to identify, instances of non-compliance with these laws, rules and regulations and transactions which we are required to block and report to OFAC. In particular, as we enhance the systems we use to screen out prohibited transactions, we may identify additional instances of non-compliance. In addition, as a result of our acquisition activities, we have acquired, and we may acquire in the future, companies for which we could face potential liability or penalties for violations if they have not implemented sufficient compliance measures to prevent transactions with targets of U.S. and other applicable sanctions laws. Failure to comply with these laws and regulations could subject us to civil or criminal penalties, government investigations, and reputational harm. In addition, if our third-party resellers fail to comply with these laws and regulations in their dealings, we could face potential liability or penalties for violations.
Changes in our solutions or changes in export and import regulations may create delays in the introduction and sale of our solutions in international markets, prevent our subscribers with international operations from deploying our solutions or, in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. Any limitations or prohibitions on, or delays affecting, our ability to export or sell our solutions could adversely affect our business, financial condition and operating results.
Impairment of goodwill and other intangible assets would result in a decrease in earnings.
Current accounting rules provide that goodwill and other intangible assets with indefinite useful lives may not be amortized, but instead must be tested for impairment at least annually. These rules also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Additionally, a reorganization of or change in the number of reporting units could result in the reassignment of goodwill between reporting units and may trigger an impairment assessment. We have substantial goodwill and other intangible assets, and we would be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or intangible assets is determined. Any impairment charges or changes to the estimated amortization periods could have a material adverse effect on our financial results. We recorded charges for impairment of goodwill and other intangible assets during 2019, and it is possible we will record additional impairment charges in the future.
Risks Related to Our Substantial Indebtedness
Our substantial level of indebtedness could materially and adversely affect our financial condition.
We now have, and expect to continue to have, significant indebtedness that could result in a material and adverse effect on our business. As of December 31, 2019, we had approximately $1.7 billion of aggregate indebtedness, not including original issue discounts of $16.9 million and deferred financing costs of $25.7 million. Under our first lien term loan facility entered into on June 20, 2018, which refinanced our prior first lien term loan facility, we are required to repay approximately $7.9 million of principal at the end of each quarter and are required to pay accrued interest upon the maturity of each interest accrual period. We estimate that our interest payments on our first lien term loan facility will be approximately $78.3 million for 2020. The interest accrual periods under our Senior Credit Facilities are typically three months in duration, except for LIBOR-based revolver loans, which are generally one or three months in duration. The actual amounts of our debt servicing payments vary based on the amounts of indebtedness outstanding, whether we borrow on a LIBOR or base rate basis, the applicable interest accrual periods and the applicable interest rates, which vary based on prescribed formulas. We are also required to pay accrued interest on the Senior Notes on a semi-annual basis. We estimate that we will pay approximately $38.1 million of interest on the Senior Notes during the year ended December 31, 2020.
We may be able to incur substantial additional debt in the future. The terms of our Senior Credit Facilities and the indenture governing the Senior Notes permit us to incur additional debt subject to certain conditions. This high level of debt could have important consequences, including:
making it more difficult for us to make payments on our indebtedness;
increasing our vulnerability to general adverse financial, business, economic and industry conditions, as well as other factors that are beyond our control;

23


requiring us to refinance, or resulting in our inability to refinance, all or a portion of our indebtedness at or before maturity, on favorable terms or at all, whether due to uncertain credit markets, our business performance, or other factors;
requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, research and development efforts and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and placing us at a disadvantage compared to our competitors that are less highly leveraged;
restricting our ability to pay dividends on our capital stock or redeem, repurchase or retire our capital stock or indebtedness;
limiting our ability to borrow additional funds;
exposing us to the risk of increased interest rates as certain of our borrowings are, and may in the future be, at variable interest rates;
requiring us to sell assets or incur additional indebtedness if we are not able to generate sufficient cash flow from operations to fund our liquidity needs; and
making it more difficult for us to fund other liquidity needs.  
The occurrence of any one of these events or our failure to generate sufficient cash flow from operations could have a material adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations under our indebtedness. If new debt is added to our current debt levels, the related risks that we now face, as described further herein, could intensify and we may not be able to meet all our debt obligations.
The elimination of LIBOR could adversely affect our business, results of operations or financial condition.
In July 2017, the head of the United Kingdom Financial Conduct Authority announced plans to phase out the use of LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark rates. These may be replaced by the Secured Overnight Financing Rate, or SOFR, or other benchmark rates over the next several years. Although the impact is uncertain at this time, the elimination of LIBOR could have an adverse impact on our business, results of operations, or financial condition. We have approximately $1,374.0 million principal amount of LIBOR-based debt under our Senior Credit Facilities. All of this amount will convert to a floating interest rate based on the prime rate if LIBOR is discontinued, which would likely result in increased interest expense. We may incur significant expenses to amend our LIBOR-indexed loans, derivatives, and other applicable financial or contractual obligations, including our Senior Credit Facilities and interest rate caps, to a new reference rate, which may differ significantly from LIBOR. Accordingly, the use of an alternative rate could result in increased costs, including increased interest expense on our Senior Credit Facilities, and increased borrowing and hedging costs in the future. Additionally, the elimination of LIBOR may adversely impact the value of and the expected return on our existing interest rate cap and any other derivatives, as well as any other contracts that reference LIBOR. At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR and we are unable to predict the effect of any such alternatives on our business, results of operations or financial condition.
The terms of our Senior Credit Facilities and the indenture governing the Senior Notes impose restrictions on our business, reducing our operational flexibility and creating default risks. Failure to comply with these restrictions, or other events, could result in default under the relevant agreements that could trigger an acceleration of our indebtedness that we may not be able to repay.
Our Senior Credit Facilities and the indenture governing the Senior Notes require compliance with a set of financial and non-financial covenants. These covenants contain numerous restrictions on our ability to, among other things:
incur additional debt;
make restricted payments (including any dividends or other distributions in respect of our capital stock and any investments);
sell or transfer assets;
enter into affiliate transactions;
create liens;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
take other actions.
As a result, we may be restricted from engaging in business activities that may otherwise improve our business or from financing future operations or capital needs. We are also required to comply with a financial covenant to not exceed a maximum ratio of consolidated senior secured net indebtedness to an adjusted consolidated EBITDA measure. Failure to comply with the covenants, if not cured or waived, could result in an event of default that could trigger acceleration of our indebtedness, which would require us to repay all amounts owing under our Senior Credit Facilities and the Senior Notes and could have a material adverse impact on our business. Our Senior Credit Facilities and the indenture governing the Senior

24


Notes also contain provisions that trigger repayment obligations, including in some cases upon a change of control, as well as various representations and warranties which, if breached, could lead to events of default. We cannot be certain that our future operating results will be sufficient to ensure compliance with the covenants in our Senior Credit Facilities or the indenture governing the Senior Notes or to remedy any defaults under our Senior Credit Facilities or the indenture governing the Senior Notes. In addition, in the event of any event of default and related acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments.
EIG Investors, the borrower under our Senior Credit Facilities and the Issuer of the Senior Notes, is a holding company, and may not be able to generate sufficient cash to service all of its indebtedness.
EIG Investors Corp, or EIG Investors, the borrower under our Senior Credit Facilities and the issuer of the Senior Notes, has no direct operations and no significant assets other than the stock of its subsidiaries. Because it conducts its operations through its operating subsidiaries, EIG Investors depends on those entities to generate the funds necessary to meet its financial obligations, including its required obligations under our Senior Credit Facilities and the Senior Notes. The ability of our subsidiaries to make transfers and other distributions to EIG Investors is subject to, among other things, the terms of any debt instruments of those subsidiaries then in effect, applicable law, prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. If transfers or other distributions from our subsidiaries to EIG Investors were eliminated, delayed, reduced or otherwise impaired, its ability to make payments on its obligations would be substantially impaired.
Furthermore, if EIG Investors’ cash flows and capital resources are insufficient to fund its debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital, restructure or refinance EIG Investors’ or our indebtedness, or sell assets. We may not be able to accomplish any of these alternatives on a timely basis, on satisfactory terms, or at all, which would limit EIG Investors’ ability to meet its scheduled debt service obligations (including in respect of our Senior Credit Facilities or the Senior Notes). Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and the financial condition of EIG Investors and us at the time. Any refinancing of EIG Investors’ debt could be at higher interest rates and may require EIG Investors to comply with more onerous covenants, which could further restrict our business operations. Our Senior Credit Facilities and the indenture governing the Senior Notes will also restrict our ability to use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets at prices that we believe are fair, and any proceeds that we receive may not be adequate to meet any debt service obligations then due. In addition, any failure to make payments of interest and principal on EIG Investors’ outstanding indebtedness on a timely basis could result in an event of default that would trigger acceleration of our indebtedness and would likely result in a reduction of EIG Investors' credit rating, which could harm our ability to incur additional indebtedness.
EIG Investors may not be able to repurchase the Senior Notes upon a change of control or pursuant to an asset sale offer, which would cause a default under the indenture governing the Senior Notes and our Senior Credit Facilities.
Upon the occurrence of specific kinds of change of control events, EIG Investors will be required under the indenture governing the Senior Notes to offer to repurchase all outstanding Senior Notes at 101% of their principal amount plus accrued and unpaid interest, if any, unless the Senior Notes have been previously called for redemption. The source of funds for any such purchase of the Senior Notes will be EIG Investors’ available cash or cash generated from its subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. EIG Investors may not be able to repurchase the Senior Notes upon a change of control because it may not have sufficient financial resources to purchase all of the Senior Notes that are tendered upon a change of control. Further, the terms of our Senior Credit Facilities and any of EIG Investors' future debt agreements may restrict EIG Investors from repurchasing all of the Senior Notes tendered by holders upon a change of control. Accordingly, EIG Investors may not be able to satisfy its obligations to purchase the Senior Notes unless it is able to refinance or obtain waivers under our Senior Credit Facilities. EIG Investors’ failure to repurchase the Senior Notes upon a change of control would cause an event of default under the indenture governing the Senior Notes and a cross-default under our Senior Credit Facilities. Our Senior Credit Facilities also provide that a change of control is an event of default that permits lenders to accelerate the maturity of borrowings thereunder. Any of EIG Investors’ future debt agreements may contain similar provisions.
In addition, in certain circumstances following a non-ordinary course asset sale as specified in the indenture governing the Senior Notes, EIG Investors may be required to commence an offer to purchase the Senior Notes with the proceeds from the asset sale at a price equal to 100% of their principal amount plus accrued and unpaid interest. Our Senior Credit Facilities and any of EIG Investors' future debt agreements may contain restrictions that would limit or prohibit EIG Investors from completing any such offer. EIG Investors’ failure to purchase any such Senior Notes when required under the indenture would be an event of default and a cross-default under our Senior Credit Facilities.
Risks Related to Ownership of Our Common Stock
Our stock price has been and may in the future be volatile, which could cause holders of our common stock to incur substantial losses.

25


The trading price of our common stock has been and may in the future be subject to substantial price volatility. As a result of this volatility, our stockholders could incur substantial losses. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this “Risk Factors” section:
low trading volume, which could cause even a small number of purchases or sales of our stock to have an impact on the trading price of our common stock;
price and volume fluctuations in the overall stock market from time to time;
significant volatility in the market price and trading volume of comparable companies;
actual or anticipated changes in our earnings or any financial projections we may provide to the public, or fluctuations in our operating results;
changes in expectations for, or evaluations of, our stock by securities analysts, or decisions by securities or industry analysts not to publish or to cease publishing research or reports about us, our business or our market;
ratings changes by debt ratings agencies;
short sales, hedging and other derivative transactions involving our capital stock;
announcements of technological innovations, new products, strategic alliances, or significant agreements by us or by our competitors;
litigation or regulatory proceedings involving us; and
recruitment or departure of key personnel.
Securities class action litigation is sometimes brought against companies that experience periods of volatility in the market price of their securities. As discussed in Note 18, Commitments and Contingencies, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, in 2015, separate class action securities lawsuits were filed against us and Constant Contact; we settled one of these lawsuits in 2019, and we expect the final settlement hearing for the other to take place in the first half of 2020. In the future, we may be the target of additional securities litigation related to volatility in our stock, which could result in substantial costs and divert management’s attention and resources from our business.
Future sales of shares of our common stock could cause the market price of our common stock to drop significantly, even if our business is doing well.
A substantial portion of our issued and outstanding common stock can be traded without restriction at any time, and the remaining shares of our issued and outstanding common stock can be sold subject to volume limitations and other requirements applicable to affiliate sales under the federal securities laws. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. In addition, we have registered 38,000,000 shares of common stock that have been issued or reserved for future issuance under our Amended and Restated 2013 Stock Incentive Plan and 14,346,830 shares of common stock that have been issued or reserved for future issuance under our Constant Contact, Inc. Second Amended and Restated 2011 Stock Incentive Plan. Of these shares, as of December 31, 2019, a total of 28,619,888 shares of our common stock are subject to outstanding options, restricted stock units and restricted stock awards, of which 17,526,179 shares are exercisable or have vested. The exercise of these options or the vesting of restricted stock units and shares of restricted stock and the subsequent sale of the common stock underlying such options or upon the vesting of such restricted stock units and restricted stock awards could cause a decline in our stock price. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We cannot predict the size of future issuances or the effect, if any, that any future issuances may have on the market price for our common stock.
In addition, holders of an aggregate of 65,693,919 shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Once we register these shares, they can be freely sold in the public market upon issuance, subject to any applicable vesting requirements.
Insiders have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control.
As of December 31, 2019, our directors, executive officers and their affiliates beneficially own, in the aggregate, 50.3% of our issued and outstanding common stock. Specifically, investment funds and entities affiliated with Warburg Pincus own, in the aggregate, 35.9% of our issued and outstanding common stock, and investment funds and entities affiliated with Goldman Sachs own, in the aggregate, approximately 10.5% of our issued and outstanding common stock. As a result, these stockholders, if they act together, could have significant influence over the outcome of matters submitted to our stockholders for approval. Our stockholders’ agreement contains agreements among the parties with respect to certain matters, including the election of directors, and certain restrictions on our ability to effect specified corporate transactions. If these stockholders were

26


to act together, they could have significant influence over the management and affairs of our company. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock. In particular, the significant ownership interest of investment funds and entities affiliated with Warburg Pincus and Goldman Sachs in our common stock could adversely affect investors’ perceptions of our corporate governance practices.
Anti-takeover provisions in our restated certificate of incorporation, our amended and restated bylaws and our stockholders agreement, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Our restated certificate of incorporation, our amended and restated bylaws, our stockholders agreement and Delaware law contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Our corporate governance documents include provisions:
authorizing blank check preferred stock, which could be issued without stockholder approval and with voting, liquidation, dividend and other rights superior to our common stock;
limiting the liability of, and providing indemnification to, our directors and officers;
limiting the ability of our stockholders to call and bring business before special meetings;
providing that any action required or permitted to be taken by our stockholders must be taken at a duly called annual or special meeting of such stockholders and may not be taken by any consent in writing by such stockholders;
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors, subject to limited exceptions set forth in our stockholders agreement;
controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;
providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;
establishing a classified board of directors so that not all members of our board are elected at one time;
establishing Delaware as the exclusive jurisdiction for specified types of stockholder litigation involving us or our directors;
providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least three directors for election to our board of directors, certain actions required or permitted to be taken by our stockholders, including amendments to our restated certificate of incorporation or amended and restated bylaws and certain specified corporate transactions, may be effected only with the affirmative vote of 75% of our board of directors, in addition to any other vote required by applicable law;
providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least one director for election to our board of directors and for so long as investment funds and entities affiliated with Goldman Sachs have the right to designate one director for election to our board of directors, in each case, a quorum of our board of directors will not exist without at least one director designee of each of Warburg Pincus and Goldman Sachs present at such meeting, subject to limited exceptions set forth in our stockholders agreement;
limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; subject to limited exceptions set forth in our stockholders agreement; and
providing that directors may be removed by stockholders only for cause by the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors; provided that any director designated by investment funds and entities affiliated with either Warburg Pincus or Goldman Sachs may be removed with or without cause only by Warburg Pincus or Goldman Sachs, respectively.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our issued and outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our issued and outstanding common stock. Since the investment funds and entities affiliated with Warburg Pincus and Goldman Sachs became holders of more than 15% of our issued and outstanding common stock in a transaction that was approved by our board of directors, the restrictions of Section 203 of the Delaware General Corporation law would not apply to a business combination transaction with any investment funds or entities affiliated with either Warburg Pincus or Goldman Sachs. In addition, our restated certificate of incorporation expressly exempts investment funds and entities affiliated with either Warburg Pincus or Goldman Sachs from the applicability of Section 203 of the Delaware General Corporation Law. Any provision of our restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

27


The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Certain of our stockholders have the right to engage or invest in the same or similar businesses as us.
Investment funds and entities affiliated with Warburg Pincus or Goldman Sachs, together, hold a significant interest in our company. Warburg Pincus, Goldman Sachs and their respective affiliates have other investments and business activities in addition to their ownership of our company. Warburg Pincus, Goldman Sachs and their respective affiliates have the right, and have no duty to abstain from exercising the right, to engage or invest in the same or similar businesses as us. To the fullest extent permitted by law, we have, on behalf of ourselves, our subsidiaries and our and their respective stockholders, renounced any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may be presented to Warburg Pincus, Goldman Sachs or any of their respective affiliates, partners, principals, directors, officers, members, managers, employees or other representatives, and no such person has any duty to communicate or offer such business opportunity to us or any of our subsidiaries or shall be liable to us or any of our subsidiaries or any of our or its stockholders for breach of any duty, as a director or officer or otherwise, by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us or our subsidiaries, unless, in the case of any such person who is a director or officer of ours, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of ours.
We may not pay any dividends on our common stock for the foreseeable future.
We do not currently anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we expect to retain any earnings to invest in our business. In addition, our ability to pay cash dividends is currently limited by the terms of our Senior Credit Facilities and the indenture governing the Senior Notes, and any future credit agreement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, to realize any return on their investment.
ITEM 1B.
Unresolved Staff Comments
None.
ITEM 2.
Properties
As of December 31, 2019, we leased approximately 115,000 square feet of office space located in Burlington, Massachusetts, which serves as our corporate headquarters, under a lease that expires in March 2026.
Our web presence segment used additional offices and data centers, primarily:
approximately 264,000 square feet of leased office space in the United States located primarily in Arizona, Texas and Utah;
approximately 59,000 square feet of leased office space outside of the United States located primarily in Brazil and the Netherlands;
approximately 57,000 square feet of office and data center space we own in Utah; and
leased and co-located data center space located primarily in Massachusetts, Texas and Virginia, with approximately 2,800 kilowatts of power under contract.
Our email marketing segment used additional offices and data centers, primarily:
approximately 149,000 square feet of leased office space in the United States located primarily in Massachusetts and Colorado; and
leased and co-located data center space located primarily in Massachusetts and Texas, with approximately 750 kilowatts of power under contract.
Our domain segment used additional offices and data centers, primarily:
approximately 4,000 square feet of leased office space in the United States located primarily in Washington;
approximately 86,000 square feet of leased office space outside of the United States located primarily in India; and
leased and co-located data center space located primarily in Texas, India and Hong Kong, with approximately 400 kilowatts of power under contract.

28


We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate planned expansion of our operations.
ITEM 3.
Legal Proceedings
From time to time we are involved in legal proceedings or subject to claims arising in the ordinary course of our business. We are not presently involved in any such legal proceeding or subject to any such claim that, in the opinion of our management, would have a material adverse effect on our business, operating results or financial condition. However, the results of such legal proceedings or claims cannot be predicted with certainty, and regardless of the outcome, can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
As previously disclosed, we were named as a defendant in two shareholder litigation matters. For more information on these legal proceedings, see Note 18, Commitments and Contingencies, to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 4.
Mine Safety Disclosures
Not applicable.
Part II
 
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Our Common Stock and Related Stockholder Matters
Our common stock is listed on the Nasdaq Global Select Market under the symbol “EIGI.”
Stockholders
As of January 31, 2020, there were approximately 31 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Dividend Policy
We currently intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare dividends will be subject to the discretion of our board of directors and applicable law and will depend on various factors, including our results of operations, financial condition, prospects and any other factors deemed relevant by our board of directors. Our credit agreement and the indenture governing our senior notes limit our ability to pay cash dividends on our common stock, and the terms of any future loan agreement into which we may enter or any additional debt securities we may issue are likely to contain similar restrictions on the payment of dividends.
Securities Authorized for Issuance Under Equity Compensation Plan
The information concerning our equity compensation plan is incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.
Stock Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act nor shall such information be incorporated by reference into any filing of Endurance International Group Holdings, Inc. under the Exchange Act or the Securities Act, except to the extent that we specifically incorporate it by reference in such filing.
The graph set forth below compares the cumulative total return on our common stock to the cumulative total return of the Nasdaq Composite Index and the RDG Internet Composite Index from December 31, 2014 through December 31, 2019. The comparison assumes $100 was invested after the market closed on December 31, 2014 in our common stock, and each of the foregoing indices, and it assumes the reinvestment of dividends, if any.

29


The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.
 
https://cdn.kscope.io/342d6b8ad7e6e6aa0b3f04875de04e3f-chart-1a3e55ae2b7055ebaa4.jpg
 
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
Endurance International Group Holdings, Inc.
$
100.00

$
59.31

$
50.46

$
45.58

$
36.08

$
25.50

Nasdaq Composite Index
$
100.00

$
106.96

$
116.45

$
150.96

$
146.67

$
200.49

RDG Internet Composite Index
$
100.00

$
128.89

$
135.45

$
203.48

$
197.34

$
262.03

ITEM 6. Selected Consolidated Financial Data
The consolidated statements of operations and comprehensive income (loss) data for the years ended December 31, 2017, 2018 and 2019, and the consolidated balance sheet data as of December 31, 2018 and 2019, are derived from our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations and comprehensive income (loss) data for the years ended December 31, 2015 and 2016, and the consolidated balance sheet data as of December 31, 2015, 2016 and 2017, are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected in any future period. The comparability of the information in the table below is affected by acquisitions we completed during the periods shown, particularly the acquisition of Constant Contact in February 2016 and the related increase in our indebtedness to finance that acquisition. You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.

30


 
For the year ended December 31,
 
2015
 
2016
 
2017
 
2018
 
2019
 
(in thousands, except per share and share information)
Consolidated Statements of Operations and Comprehensive Income (Loss) Data:
 
 
 
 
 
 
 
 
 
Revenue
$
741,315

 
$
1,111,142

 
$
1,176,867

 
$
1,145,291

 
$
1,113,278

Cost of revenue(1)
425,035

 
583,991

 
603,930

 
520,737

 
510,296

Gross profit
316,280

 
527,151

 
572,937

 
624,554

 
602,982

Operating expense:
 
 
 
 
 
 
 
 
 
Sales and marketing
145,419

 
303,511

 
277,460

 
265,424

 
258,019

Engineering and development(2)
26,707

 
87,601

 
78,772

 
87,980

 
106,377

General and administrative(3)
90,968

 
175,379

 
164,745

 
124,204

 
117,967

Gain on sale of business

 

 

 

 
(40,700
)
Impairment of goodwill

 

 
12,129

 

 
12,333

Total operating expense(4)
263,094

 
566,491

 
533,106

 
477,608

 
453,996

Income (loss) from operations
53,186

 
(39,340
)
 
39,831

 
146,946

 
148,986

Total other expense, net
(52,974
)
 
(150,450
)
 
(157,006
)
 
(148,391
)
 
(143,454
)
Income (loss) before income taxes and equity earnings of unconsolidated entities
212

 
(189,790
)
 
(117,175
)
 
(1,445
)
 
5,532

Income tax expense (benefit)
11,342

 
(109,858
)
 
(17,281
)
 
(6,246
)
 
17,879

(Loss) income before equity earnings of unconsolidated entities
(11,130
)
 
(79,932
)
 
(99,894
)
 
4,801

 
(12,347
)
Equity loss (income) of unconsolidated entities, net of tax
14,640

 
1,297

 
(110
)
 
267

 

Net (loss) income
(25,770
)
 
(81,229
)
 
(99,784
)
 
4,534

 
(12,347
)
Net (loss) income attributable to non-controlling interest

 
(8,398
)
 
7,524

 

 

Net (loss) income attributable to Endurance International Group Holdings, Inc.
$
(25,770
)
 
$
(72,831
)
 
$
(107,308
)
 
$
4,534

 
$
(12,347
)
Net (loss) income per share attributable to Endurance International Group Holdings, Inc.
 
 
 
 
 
 
 
 
 
Basic
$
(0.20
)
 
$
(0.55
)
 
$
(0.78
)
 
$
0.03

 
$
(0.09
)
Diluted
$
(0.20
)
 
$
(0.55
)
 
$
(0.78
)
 
$
0.03

 
$
(0.09
)
Weighted average shares used to compute net (loss) income per share attributable to Endurance International Group Holdings, Inc.
 
 
 
 
 
 
 
 
 
Basic
131,340,557

 
133,415,732

 
137,322,201

 
142,316,993

 
145,259,691

Diluted
131,340,557

 
133,415,732

 
137,322,201

 
145,669,760

 
145,259,691

(1)
Includes stock-based compensation expense of $2.0 million, $5.9 million, $6.1 million, $3.8 million and $3.3 million, for the years ended December 31, 2015, 2016, 2017, 2018 and 2019, respectively. Also includes amortization expense of $91.1 million, $143.6 million, $140.4 million, $103.1 million and $85.2 million for the years ended December 31, 2015, 2016, 2017, 2018 and 2019, respectively. Also includes impairment of intangible assets of $18.7 million for the year ended December 31, 2017 and $25.2 million for the year ended December 31, 2019.
(2)
Includes impairment of intangible assets of $9.0 million for the year ended December 31, 2016.
(3)
Includes transaction expenses of $9.6 million, $32.3 million, $0.8 million, $0.0 million, and $0.0 million for the years ended December 31, 2015, 2016, 2017, 2018 and 2019, respectively.
(4)
Includes stock-based compensation expense of $27.9 million, $52.4 million, $53.9 million, $25.2 million and $32.4 million for the years ended December 31, 2015, 2016, 2017, 2018 and 2019, respectively.


31


 
For the year ended December 31,
 
2015
 
2016
 
2017
 
2018
 
2019
 
(in thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
33,030

 
$
53,596

 
$
66,493

 
$
88,644

 
$
111,265

Property and equipment, net
75,762

 
95,272

 
95,452

 
92,275

 
85,925

Working capital (deficit)
(370,335
)
 
(362,677
)
 
(359,222
)
 
(300,692
)
 
(278,143
)
Total assets
1,802,500

 
2,756,274

 
2,600,034

 
2,606,507

 
2,584,086

Current and long-term debt, net of original issuance discounts and deferred financing costs(1)
1,092,385

 
1,986,980

 
1,892,245

 
1,801,661

 
1,681,473

Current and long-term financed equipment
13,081

 
7,202

 
15,349

 
8,379

 
790

Total stockholders’ equity
179,674

 
124,383

 
83,005

 
174,454

 
196,954

(1)
Net of deferred financing costs of $1.0 million, $43.3 million, $37.7 million, $32.0 million and $25.7 million for the years ended December 31, 2015, 2016, 2017, 2018 and 2019, respectively, for the Company's retrospective adoption of ASU 2015-03: Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The years ended December 31, 2016, 2017, 2018 and 2019 are also net of original issuance discount of $25.9 million, $25.8 million, $21.3 million and $16.9 million, respectively.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a leading provider of cloud-based platform solutions designed to help small- and medium-sized businesses, or SMBs, succeed online. We serve approximately 4.8 million subscribers globally with a range of products and services that help SMBs get online, get found and grow their businesses. In addition to for-profit businesses, our subscribers include non-profit organizations, community groups, bloggers, and hobbyists. Although we provide our solutions through a number of brands, we are focusing our marketing, engineering and product development efforts on a small number of strategic assets, including our Constant Contact, Bluehost, HostGator, and Domain.com brands.
From fiscal year 2017 through fiscal year 2019, we have reported our financial results in three reportable segments, as follows:
Web Presence. Our 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. Our email 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, or Ecomdash, which we acquired in the third quarter of 2019. For most of 2019, the email marketing segment also included the SinglePlatform digital storefront business, which we sold on December 5, 2019.
Domain. Our 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.
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. In 2020, we plan to modify our internal reporting structure to reflect these changes in our structure and leadership, and also to change the name of the email marketing segment to the "digital marketing" segment. This will result in consolidation of our current domain segment into our web presence segment, such that we expect to report our financial results in two segments - web presence (including domains) and digital marketing - beginning with the first quarter of 2020.

32


During 2018 and 2019, we focused on investing to improve the customer experience and expand product offerings in our strategic brands, including Constant Contact, Bluehost, HostGator and Domain.com, and on simplifying our business. Although our revenue, net income, operating cash flows and total subscriber base decreased in 2019 relative to 2018, we believe the second half of 2019 began to show positive results from our continuing investment and simplification efforts. Our fourth quarter 2019 revenue was flat as compared to third quarter 2019 revenue, and when third and fourth quarter 2019 revenue are both adjusted to exclude the revenue contribution of our SinglePlatform business, which we sold on December 5, 2019, fourth quarter revenue increased relative to third quarter revenue. SinglePlatform contributed $6.8 million and $4.8 million in revenue in the third and fourth quarters of 2019, respectively, and $28.4 million and $25.4 million in revenue in 2018 and 2019, respectively.
Changes in our revenue, net income (loss) and net cash provided by operating activities from 2018 to 2019 are summarized below:
 
Year Ended December 31, 2018
 
Year Ended December 31, 2019
 
(in thousands)
Revenue
$
1,145,291

 
$
1,113,278

Net income (loss)
$
4,534

 
$
(12,347
)
Net cash provided by operating activities
$
182,552

 
$
161,973

Revenue decreased by 3% from 2018 primarily due to revenue declines in the web presence segment and to a lesser extent, in the domain segment. This decline was partially offset by an increase in email marketing segment revenue.
We had a net loss in 2019 as compared to net income in 2018, due primarily to impairment charges, decreases in revenue, increases in income taxes and increases in stock-based compensation expense. This change was partially offset by a gain from the disposition of SinglePlatform, and decreases in amortization, depreciation and interest expenses.
Net cash provided by operating activities decreased by 11% from 2018. This decrease was primarily due to lower revenue and subscriber billings, timing of vendor payments, and higher income tax payments. These factors were partially offset by lower restructuring and interest payments in 2019. Our 2019 cash flows allowed us to make voluntary debt principal payments of $51.3 million in 2019, which were in addition to required debt principal payments of $31.6 million made during the year. In addition, our proceeds from the disposition of SinglePlatform triggered an additional mandatory repayment of $48.1 million.
With respect to total subscribers, we recorded net subscriber additions for the third quarter of 2019. Fourth quarter 2019 net subscriber additions would also have been positive but for the impact of the sale of SinglePlatform, which resulted in a decrease of approximately 23,000 subscribers. Our non-strategic brands continue to lose subscribers, but the rate of attrition slowed during 2019, and for the third and fourth quarters, net subscriber additions from our strategic brands (in the aggregate and excluding the impact of the SinglePlatform sale) outpaced losses in the non-strategic brands. Our non-strategic brands are principally web hosting brands, but also include our cloud backup brands and certain other products that we launched in late 2015 and early 2016, and that we have either discontinued or no longer actively market. Subscriber counts are decreasing in these brands, and we are managing them to optimize cash flow rather than to acquire new subscribers.
Our operating plan for 2020 continues to focus on delivering increased value to customers of our key strategic brands, and on further simplifying our operations. We expect to continue our investments in engineering and development in 2020 in order to further improve the customer experience and expand product offerings in our strategic brands. We also intend to invest more heavily in marketing efforts for our strategic brands as compared to 2018 and 2019. We expect that these investments will adversely impact our net income (loss), adjusted EBITDA, cash flows from operations and free cash flow during 2020.
Key Metrics
We use a number of metrics, including the following key metrics, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions:
 
total subscribers
average revenue per subscriber, or ARPS
adjusted EBITDA, and
free cash flow
Adjusted EBITDA and free cash flow are non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that includes or excludes amounts that are included or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. Our non-

33


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 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.
The following table summarizes our key metrics (except for free cash flow, which is discussed in Liquidity and Capital Resources below) by segment for the periods presented:
 
Year Ended December 31,
 
2017
 
2018
 
2019
 
(in thousands, except ARPS)
Consolidated metrics:
 
 
 
 
 
Total subscribers
5,051

 
4,802

 
4,766

Average subscribers
5,211

 
4,927

 
4,793

Average revenue per subscriber
$
18.82

 
$
19.37

 
$
19.35

Adjusted EBITDA
$
350,814

 
$
338,058

 
$
313,644

 
 
 
 
 
 
Web presence segment metrics:
 
 
 
 
 
Total subscribers
3,849

 
3,639

 
3,567

Average subscribers
4,024

 
3,744

 
3,603

Average revenue per subscriber
$
13.29

 
$
13.47

 
$
13.34

Adjusted EBITDA
$
165,088

 
$
146,578

 
$
132,575

 
 
 
 
 
 
Email marketing segment metrics:
 
 
 
 
 
Total subscribers(1)
519

 
497

 
468

Average subscribers
531

 
508

 
492

Average revenue per subscriber
$
62.92

 
$
67.28

 
$
69.58

Adjusted EBITDA
$
185,869

 
$
183,384

 
$
174,555

 
 
 
 
 
 
Domain segment metrics:
 
 
 
 
 
Total subscribers
683

 
666

 
731

Average subscribers
656

 
675

 
698

Average revenue per subscriber
$
16.98

 
$
16.05

 
$
15.02

Adjusted EBITDA
$
(143
)
 
$
8,096

 
$
6,514

(1) The total email marketing subscriber count as of December 31, 2019 includes approximately 1,300 subscribers added as part of the September 2019 acquisition of Ecomdash and reflects a decrease of approximately 23,000 subscribers due to the December 2019 sale of our SinglePlatform business.
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.
Most of our web presence segment subscribers have hosting subscriptions, but web presence subscribers also include customers who do not have a web hosting subscription but subscribe to other non-hosting services such as email or domain privacy. These subscribers generally have lower-priced subscriptions than hosting subscribers.

34


Email marketing segment subscribers mostly consist of subscribers to Constant Contact's email marketing service, but also include paying subscribers to our Constant Contact-branded website builder tool and our Ecomdash inventory management and marketplace listing solution, which we acquired in the quarter ended September 30, 2019. Until the sale of our SinglePlatform business on December 5, 2019, email marketing subscribers also included SinglePlatform subscribers. Our email marketing and total subscriber counts as of December 31, 2019 include approximately 1,300 subscribers added as part of the Ecomdash acquisition and reflect a decrease of approximately 23,000 subscribers due to the sale of SinglePlatform.
Domain segment subscribers mostly consist of customers who have a domain name subscription as well as a subscription to another product, such as domain privacy, office productivity software, or a basic hosting, email or domain privacy service that is bundled with their domain subscription. Also included as domain segment subscribers are hosting customers of our BigRock and HostGator India brands and certain other small web hosting brands that are under common management with our domain-focused brands.
The table below shows the approximate sources of changes in our total subscriber count by segment during 2018 and 2019. Adjustments below are shown on a full year basis.
 
Web Presence
Email Marketing
Domain
Total
 
(in thousands)
Total Subscribers - December 31, 2017
3,849

519

683

5,051

Adjustments
10


(14
)
(4
)
Net subscriber decrease
(220
)
(22
)
(3
)
(245
)
Total Subscribers - December 31, 2018
3,639

497

666

4,802

Acquisitions

1


1

Dispositions

(23
)

(23
)
Adjustments
(2
)
1


(1
)
Net subscriber (decrease) increase
(70
)
(8
)
65

(13
)
Total Subscribers - December 31, 2019
3,567

468

731

4,766

The decrease in total subscribers from 4.802 million at December 31, 2018 to 4.766 million at December 31, 2019 was driven primarily by subscriber losses in our web presence segment, which were due to subscriber attrition in our non-strategic brands, and, to a lesser extent, by subscriber losses in our email marketing segment (including a decrease of approximately 23,000 subscribers due to the SinglePlatform sale). These subscriber losses were partially offset by subscriber additions in our domain segment.
The decrease in total subscribers from 5.051 million at December 31, 2017 to 4.802 million at December 31, 2018 was driven primarily by subscriber losses in our web presence segment, a majority of which were due to subscriber attrition in our non-strategic brands, and, to a lesser extent, by subscriber losses in our email marketing and domain segments.
Average Revenue per Subscriber
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. For our web presence and email marketing segments, we believe ARPS is an indicator of our ability to optimize our mix of products, services and pricing and sell products and services to both new and existing subscribers. For our domain segment, ARPS may fluctuate from period to period due to changes in the amount of non-subscription-based revenue, reseller activity and other factors impacting this segment as discussed in more detail below.
The following table reflects the calculation of ARPS by segment:



35


 
Year Ended December 31,
 
2017
 
2018
 
2019
 
(in thousands, except ARPS)
Consolidated revenue
$
1,176,867

 
$
1,145,291

 
$
1,113,278

Consolidated total subscribers
5,051

 
4,802

 
4,766

Consolidated average subscribers for the period
5,211

 
4,927

 
4,793

Consolidated ARPS
$
18.82

 
$
19.37

 
$
19.35

 
 
 
 
 
 
Web presence revenue
$
641,993

 
$
605,315

 
$
576,704

Web presence subscribers
3,849

 
3,639

 
3,567

Web presence average subscribers
4,024

 
3,744

 
3,603

Web presence ARPS
$
13.29

 
$
13.47

 
$
13.34

 
 
 
 
 
 
Email marketing revenue
$
401,250

 
$
410,052

 
$
410,672

Email marketing subscribers(1)
519

 
497

 
468

Email marketing average subscribers
531

 
508

 
492

Email marketing ARPS
$
62.92

 
$
67.28

 
$
69.58

 
 
 
 
 
 
Domain revenue
$
133,624

 
$
129,924

 
$
125,902

Domain subscribers
683

 
666

 
731

Domain average subscribers
656

 
675

 
698

Domain ARPS
$
16.98

 
$
16.05

 
$
15.02

(1) The total email marketing subscriber count as of December 31, 2019 includes approximately 1,300 subscribers added as part of the September 2019 acquisition of Ecomdash and reflects a decrease of approximately 23,000 subscribers due to the December 2019 sale of our SinglePlatform business.
ARPS does not represent an exact measure of the average amount a subscriber spends with us each month, because our calculation of ARPS includes all of our revenue, including revenue generated by non-subscribers, in the numerator. We have three principal sources of non-subscription-based revenue:
Revenue from domain-only customers. Our web presence and domain segments each earn revenue from domain-only customers. For our web presence segment, approximately 0.5% of our fiscal year 2019 revenue was earned from domain-only customers. For our domain segment, approximately 4.3% of our revenue for fiscal year 2019 was earned from domain-only customers.
Domain monetization revenue. This consists principally of revenue from our BuyDomains brand, which provides premium domain name products and services, and, to a lesser extent, revenue from advertisements placed on unused domains (often referred to as “parked” pages) owned by us or our customers. A significant portion of this revenue is associated with our domain segment.
Revenue from marketing development funds. Marketing development funds are the amounts that certain of our partners pay us to assist in and incentivize our marketing of their products.
A portion of our revenue is generated from customers that resell our services. We refer to these customers as “resellers.” We consider these resellers (rather than the end user customers of these resellers) to be subscribers under our total subscribers definition, because we do not have a billing relationship with the end users and cannot determine the number of end users acquiring our services through a reseller. A majority of our reseller revenue is for the purchase of domains and is primarily related to our domain segment. Approximately 41% of our domain segment revenue is earned from resellers. Reseller revenue earned by our web presence segment and our email marketing segment was less than 4% and less than 1%, respectively, for all periods presented, and fluctuations in reseller revenue have not materially impacted ARPS for these segments.
Comparison of Year Ended December 31, 2018 and 2019: ARPS
For the years ended December 31, 2018 and 2019, consolidated ARPS decreased from $19.37 to $19.35, respectively. This decrease in ARPS was driven primarily by lower ARPS in our domain segment, and to a lesser extent by a decrease in ARPS in our web presence segment. These decreases were partially offset by higher ARPS in our email marketing segment.

36


Web presence ARPS decreased from $13.47 for the year ended December 31, 2018 to $13.34 for the year ended December 31, 2019, primarily due to the impact of more subscribers joining our platform at introductory pricing, which is typically lower than renewal pricing.
Email marketing ARPS increased from $67.28 for the year ended December 31, 2018 to $69.58 for the year ended December 31, 2019, primarily due to additional purchases by existing subscribers and price increases.
Domain ARPS decreased from $16.05 for the year ended December 31, 2018 to $15.02 for the year ended December 31, 2019. This decrease was partially due to a decrease in non-subscription-based revenue, including sales of premium domains and domain monetization, from $25.8 million for fiscal year 2018 to $23.4 million for fiscal year 2019, which decreased ARPS by $0.39, and the balance of the decrease was attributable to an increased number of subscribers to our lower-priced product offerings.
Comparison of Year Ended December 31, 2017 and 2018: ARPS
For the years ended December 31, 2017 and 2018, consolidated ARPS increased from $18.82 to $19.37, respectively. This increase in ARPS was driven primarily by our email marketing segment, and to a lesser extent, a focus on higher lifetime revenue subscribers in our web presence segment. These increases in ARPS were partially offset by lower ARPS in our domain segment.
Web presence ARPS increased from $13.29 for the year ended December 31, 2017 to $13.47 for the year ended December 31, 2018, primarily due to a shift in our marketing programs away from targeting subscribers for our lower priced products, and towards targeting subscribers who have higher lifetime revenue potential. This shift in focus has resulted in a loss of subscribers of lower priced products, resulting in an overall increase in ARPS.
Email marketing ARPS increased from $62.92 for the year ended December 31, 2017 to $67.28 for the year ended December 31, 2018, primarily due to price increases and additional purchases by existing subscribers.
Domain ARPS decreased from $16.98 for the year ended December 31, 2017 to $16.05 for the year ended December 31, 2018. This decrease was partially due to a decrease in non-subscription-based revenue, including domain monetization and marketing development funds, from $27.6 million for fiscal year 2017 to $25.8 million for fiscal year 2018, which decreased ARPS by $0.33, and the balance of the decrease was attributable to increased sales of lower priced products.
  Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), 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 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.
SEC investigations reserve refers to a reserve we recorded in the third quarter of 2017 in connection with the Securities and Exchange Commission investigations initiated against Endurance and Constant Contact in December 2015, which we settled in June 2018. Shareholder litigation reserve refers to a reserve we first recorded in the first quarter of 2018 in connection with shareholder class action lawsuits filed against each of Endurance and Constant Contact in 2015. As described in Note 18, Commitments and Contingencies, to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, we settled the Endurance lawsuit during 2019, and we expect the final settlement hearing for the Constant Contact lawsuit to take place in 2020.
The following table reflects the reconciliation of adjusted EBITDA to net (loss) income calculated in accordance with GAAP for the periods presented.


37


 
Year Ended December 31,
 
2017
 
2018
 
2019
Consolidated
(in thousands)
Net (loss) income
$
(99,784
)
 
$
4,534

 
$
(12,347
)
Interest expense, net(1)
156,406

 
148,391

 
143,454

Income tax (benefit) expense
(17,281
)
 
(6,246
)
 
17,879

Depreciation
55,185

 
48,207

 
44,951

Amortization of other intangible assets
140,354

 
103,148