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Endurance International Group Reports 2020 Third Quarter Results

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Endurance International Group Holdings reported a GAAP revenue of $278.4 million for Q3 2020, a 3% increase from Q3 2019. However, net income fell to $6.7 million compared to $7.8 million in the prior year. Adjusted EBITDA decreased by 1% to $78.7 million. The company achieved a significant 33% growth in cash flow from operations to $54.6 million and a 53% increase in free cash flow to $42.6 million. Total subscribers reached approximately 4.965 million, marking an increase from the previous year.

Positive
  • GAAP revenue increased by 3% year-over-year to $278.4 million.
  • Cash flow from operations rose 33% to $54.6 million.
  • Free cash flow grew by 53% to $42.6 million.
  • Total subscribers increased to approximately 4.965 million, up from 4.780 million year-over-year.
Negative
  • Net income decreased to $6.7 million from $7.8 million year-over-year.
  • Adjusted EBITDA fell by 1% to $78.7 million.
  • GAAP revenue of $278.4 million
  • Net income of $6.7 million
  • Adjusted EBITDA of $78.7 million
  • Cash flow from operations of $54.6 million
  • Free cash flow of $42.6 million
  • Total subscribers on platform were approximately 4.965 million at September 30, 2020

BURLINGTON, Mass., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Endurance International Group Holdings, Inc. (NASDAQ: EIGI), a leading provider of cloud-based platform solutions designed to help small and medium-sized businesses succeed online, today reported financial results for its third quarter ended September 30, 2020.

In light of Endurance’s announcement this morning of its agreement to be acquired by affiliates of Clearlake Capital Group L.P., the Company does not intend to hold a conference call on Thursday, November 5, 2020 to discuss third quarter 2020 financial results as previously announced.

Third Quarter 2020 Financial Highlights

As previously disclosed, the Company completed the sale of SinglePlatform on December 5, 2019. For year over year comparative purposes, selected figures presented below do not adjust for the sale of SinglePlatform unless noted.

  • Revenue for the third quarter of 2020 was $278.4 million, an increase of 3 percent compared to revenue of $270.4 million in the third quarter of 2019, excluding SinglePlatform. Revenue in the third quarter of 2019 was $277.2 million, including the contribution of approximately $6.8 million from SinglePlatform.
  • Net income for the third quarter of 2020 was $6.7 million, or $0.05 per diluted share, compared to net income of $7.8 million, or $0.05 per diluted share, for the third quarter of 2019.
  • Adjusted EBITDA for the third quarter of 2020 was $78.7 million, a decrease of 1 percent compared to third quarter 2019 adjusted EBITDA of $79.6 million, excluding SinglePlatform. Adjusted EBITDA in the third quarter of 2019 was $80.6 million, including the contribution of approximately $1.1 million from SinglePlatform.
  • Cash flow from operations for the third quarter of 2020 was $54.6 million, an increase of 33 percent compared to $41.0 million for the third quarter of 2019.
  • Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment obligations, for the third quarter of 2020 was $42.6 million, an increase of 53 percent compared to $27.8 million for the third quarter of 2019.
  • Under its previously announced authorization, during 2020, the Company repurchased 8,708,720 shares for a total of $14.4 million, at an average price per share of $1.66. The Company did not make any repurchases during the third quarter of 2020.

Third Quarter 2020 Operating Highlights

  • Total subscribers on platform at September 30, 2020 were approximately 4.965 million, compared to approximately 4.780 million subscribers at September 30, 2019 and approximately 4.766 million subscribers at December 31, 2019. See “Total Subscribers” below.
  • Average revenue per subscriber, or ARPS, for the third quarter of 2020 was $18.86, compared to $19.35 for the third quarter 2019 and $19.34 for the fourth quarter of 2019. See “Average Revenue Per Subscriber” below.

Adjusted EBITDA and free cash flow are non-GAAP financial measure. Please see “Non-GAAP Financial Measures” below.

About Endurance International Group

Endurance International Group Holdings, Inc. (NASDAQ:EIGI) helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator and Domain.com, among others. Headquartered in Burlington, Massachusetts, Endurance employs approximately 3,800 people across the United States, Brazil, India and the Netherlands. For more information, visit: www.endurance.com.

Endurance International Group and the compass logo are trademarks of The Endurance International Group, Inc. Constant Contact, the Constant Contact logo and other brand names of Endurance International Group are trademarks of The Endurance International Group, Inc. or its subsidiaries.

Investor Contact:
Angela White
Endurance International Group
(781) 852-3450
ir@endurance.com

Press Contact:
Kristen Andrews
Endurance International Group
(781) 418-6716
press@endurance.com

Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, we use adjusted EBITDA and free cash flow, which are non-GAAP financial measures, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions. In this press release, we are also presenting the following additional non-GAAP financial measures for certain periods: revenue - excluding SinglePlatform and adjusted EBITDA - excluding SinglePlatform. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP or includes amounts that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. For example, adjusted EBITDA excludes interest expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business. The presentation of non-GAAP financial information is not meant to be considered in isolation from, or as a substitute for, the most directly comparable financial measures prepared in accordance with GAAP. We urge you to review the additional information about our non-GAAP measures shown below, including the reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Revenue - excluding SinglePlatform is a non-GAAP financial measure that we calculate as revenue excluding revenue contributed by our SinglePlatform business, which we sold on December 5, 2019. We believe that this measure helps investors evaluate and compare our past performance excluding the impact of a non-core business that we have sold.

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, gain on sale of business, (gain) loss of unconsolidated entities, impairment of goodwill and other long-lived assets, and shareholder litigation reserve. We view adjusted EBITDA as a performance measure and believe it helps investors evaluate and compare our core operating performance from period to period.

Adjusted EBITDA - excluding SinglePlatform is a non-GAAP financial measure that we calculate as adjusted EBITDA less adjusted EBITDA contributed by our SinglePlatform business, which we sold on December 5, 2019. Adjusted EBITDA contributed by our SinglePlatform business excludes the impact of corporate costs that we had allocated to SinglePlatform. We believe that this measure helps investors evaluate and compare our past performance excluding the impact of a non-core business that we have sold.

Free Cash Flow, or FCF, is a non-GAAP financial measure that we calculate as cash flow from operations less capital expenditures and financed equipment. We believe that FCF provides investors with an indicator of our ability to generate positive cash flows after meeting our obligations with regard to capital expenditures (including financed equipment).

Key Operating Metrics
Total Subscribers - We define total subscribers as the approximate number of subscribers that, as of the end of a period, are identified as subscribing directly to our products on a paid basis, excluding accounts that access our solutions via resellers or that purchase only domain names from us. Subscribers of more than one brand, and subscribers with more than one distinct billing relationship or subscription with us, are counted as separate subscribers. Total subscribers for a period reflects adjustments to add or subtract subscribers as we integrate acquisitions and/or are otherwise able to identify subscribers that meet, or do not meet, this definition of total subscribers. In the third quarter of 2020, no such adjustments were made.

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



Endurance International Group Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

 December 31, 2019 September 30, 2020
Assets  (unaudited)
Current assets:   
Cash and cash equivalents$111,265  $167,315 
Restricted cash1,732  1,422 
Accounts receivable10,224  9,823 
Prepaid domain name registry fees55,237  58,377 
Prepaid commissions38,435  42,042 
Prepaid and refundable taxes6,810  5,175 
Prepaid expenses and other current assets23,883  22,748 
Total current assets247,586  306,902 
Property and equipment—net85,925  88,349 
Operating lease right-of-use assets90,519  83,224 
Goodwill1,835,310  1,852,780 
Other intangible assets—net245,002  207,579 
Deferred financing costs—net1,778  1,119 
Investments15,000  15,000 
Prepaid domain name registry fees, net of current portion11,107  12,808 
Prepaid commissions, net of current portion48,780  60,864 
Deferred tax asset64  232 
Other assets3,015  2,923 
Total assets$2,584,086  $2,631,780 
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$10,054  $13,670 
Accrued expenses64,560  72,534 
Accrued taxes251  461 
Accrued interest23,434  12,360 
Deferred revenue369,475  388,500 
Operating lease liabilities—short term21,193  18,090 
Current portion of notes payable31,606  31,606 
Current portion of financed equipment790  2,447 
Deferred consideration—short term2,201  7,790 
Other current liabilities2,165  2,846 
Total current liabilities525,729  550,304 
Long-term deferred revenue99,652  105,418 
Operating lease liabilities—long term78,151  74,461 
Notes payable—long term, net of original issue discounts of $16,859 and $13,101 and deferred financing costs of $25,690 and $20,210, respectively1,649,867  1,623,171 
Financed equipment—long term  202 
Deferred tax liability27,097  34,864 
Deferred consideration—long term  7,087 
Other liabilities6,636  13,552 
Total liabilities2,387,132  2,409,059 
Stockholders’ equity:   
Preferred Stock—par value $0.0001; 5,000,000 shares authorized; no shares issued or outstanding   
Common Stock—par value $0.0001; 500,000,000 shares authorized; 146,259,868 and 147,570,072 shares issued at December 31, 2019 and September 30, 2020, respectively; 146,259,868 and 141,507,297 outstanding at December 31, 2019 and September 30, 2020, respectively15  16 
Additional paid-in capital996,958  1,021,621 
Treasury stock, at cost, 0 and 6,062,775 shares at December 31, 2019 and September 30, 2020, respectively  (10,048)
Accumulated other comprehensive loss(4,088) (1,965)
Accumulated deficit(795,931) (786,903)
Total stockholders’ equity196,954  222,721 
Total liabilities and stockholders’ equity$2,584,086  $2,631,780 



Endurance International Group Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)
(in thousands, except share and per share amounts)

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2020 2019 2020
Revenue$277,193  $278,426  $836,080  $824,607 
Cost of revenue (including impairment of $0 and $17,892 for the three and nine months ended September 30, 2019, respectively)120,755  116,662  384,196  345,991 
Gross profit156,438  161,764  451,884  478,616 
Operating expense:       
Sales and marketing59,143  63,651  191,221  193,904 
Engineering and development28,257  28,425  77,299  79,958 
General and administrative30,309  31,160  92,826  90,937 
Gain on sale of intangible assets      (2,365)
Transaction expenses  461    461 
Total operating expense117,709  123,697  361,346  362,895 
Income from operations38,729  38,067  90,538  115,721 
Other income (expense):       
Interest income305  153  910  485 
Interest expense(36,057) (29,959) (110,308) (93,879)
Total other expense—net(35,752) (29,806) (109,398) (93,394)
Income (loss) before income taxes2,977  8,261  (18,860) 22,327 
Income tax (benefit) expense(4,839) 1,587  3,040  13,299 
Net income (loss)$7,816  $6,674  (21,900) 9,028 
Comprehensive income (loss):       
Foreign currency translation adjustments(1,001) 1,245  (1,054) 1,122 
Unrealized gain (loss) on cash flow hedge, net of tax benefit (expense) of $(70) and $200 for the three and nine months ended September 30, 2019, respectively, and $(92) and $(323) for the three and nine months ended September 30, 2020, respectively240  286  (611) 1,001 
Total comprehensive income (loss)$7,055  $8,205  $(23,565) $11,151 
Basic net income (loss) per share$0.05  $0.05  $(0.15) $0.06 
Diluted net income (loss) per share$0.05  $0.05  $(0.15) $0.06 
Weighted-average common shares used in computing net income (loss) per share:       
Basic145,951,755  141,680,469  144,932,834  143,552,324 
Diluted146,301,595  147,178,734  144,932,834  147,334,403 



Endurance International Group Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2020 2019 2020
Cash flows from operating activities:       
Net income (loss)$7,816  $6,674  $(21,900) $9,028 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:       
Depreciation of property and equipment11,280  12,824  33,385  38,266 
Amortization of other intangible assets21,668  17,813  64,137  52,406 
Impairment of long-lived assets    17,892   
Amortization of deferred financing costs1,822  1,978  5,331  5,770 
Amortization of net present value of deferred consideration23  331  143  376 
Amortization of original issue discounts1,138  1,255  3,336  3,622 
Stock-based compensation9,143  9,547  27,513  28,978 
Deferred tax expense(685) 1,012  1,942  6,467 
Loss on sale of assets(8)   128   
Gain on sale of intangible assets      (2,365)
Loss on early extinguishment of debt      83 
Changes in operating assets and liabilities, net of acquisitions:       
Accounts receivable827  1,743  34  893 
Prepaid and refundable taxes(6,633) 108  (5,908) 1,620 
Prepaid expenses and other current assets2,780  (1,979) 5,108  (20,069)
Leases right-of-use asset, net(258) 201  395  519 
Accounts payable and accrued expenses(8,357) (3,858) (23,492) 4,416 
Deferred revenue395  6,920  7,636  27,222 
Net cash provided by operating activities40,951  54,569  115,680  157,232 
Cash flows from investing activities:       
Businesses acquired in purchase transactions, net of cash acquired(8,875) (16,998) (8,875) (16,998)
Purchases of property and equipment(10,632) (10,264) (26,796) (30,273)
Proceeds from sale of assets1    1   
Proceeds from sale of intangible assets      2,705 
Net cash used in investing activities(19,506) (27,262) (35,670) (44,566)
Cash flows from financing activities:       
Repayments of term loans(25,000) (7,902) (75,000) (23,705)
Repayments of senior notes      (11,807)
Purchase of treasury stock      (14,428)
Principal payments on financed equipment(2,471) (1,749) (6,332) (4,723)
Payment of deferred consideration    (2,500) (1,500)
Proceeds from exercise of stock options4  53  26  66 
Net cash used in financing activities(27,467) (9,598) (83,806) (56,097)
Net effect of exchange rate on cash and cash equivalents and restricted cash(331) 203  (483) (829)
Net (decrease) increase in cash and cash equivalents and restricted cash(6,353) 17,912  (4,279) 55,740 
Cash and cash equivalents and restricted cash:       
Beginning of period92,650  150,825  90,576  112,997 
End of period$86,297  $168,737  $86,297  $168,737 
Supplemental cash flow information:       
Interest paid$42,533  $35,169  $110,886  $93,773 
Income taxes paid$991  $1,091  $1,715  $4,296 
Assets acquired under equipment financing$  $  $  $7,704 



GAAP to Non-GAAP Reconciliation - Adjusted EBITDA

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

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2020 2019 2020
Net income (loss)$7,816  $6,674  $(21,900) $9,028 
Interest expense, net(1)35,752  29,806  109,398  93,394 
Income tax (benefit) expense(4,839) 1,587  3,040  13,299 
Depreciation11,280  12,824  33,385  38,266 
Amortization of other intangible assets21,668  17,813  64,137  52,406 
Stock-based compensation9,143  9,547  27,513  28,978 
Restructuring expenses(193) 33  2,005  1,749 
Gain on sale of intangible assets      (2,365)
Gain on sale of business       
Transaction expenses and charges  461    461 
Impairment of goodwill and other long-lived assets    17,892   
Shareholder litigation reserve       
Adjusted EBITDA$80,627  $78,745  $235,470  $235,216 

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



GAAP to Non-GAAP Reconciliation – Free Cash Flow

The following table reflects the reconciliation of cash flow from operations to free cash flow (“FCF”) (all data in thousands):

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2020 2019 2020
Cash flows from operations$40,951  $54,569  $115,680  $157,232 
Less:       
Capital expenditures and financed equipment obligations(1)(13,103) (12,013) (33,128) (34,996)
Free cash flow$27,848  $42,556  $82,552  $122,236 

(1)     Capital expenditures during the three months ended September 30, 2019 and 2020 includes $2.5 million and $1.7 million, respectively, of principal payments under a three year agreement for equipment financing. Capital expenditures during the nine months ended September 30, 2019 and 2020 includes $6.3 million and $4.7 million, respectively, of principal payments under a three year agreement for equipment financing. The remaining balance on the equipment financing is $2.6 million as of September 30, 2020.



Average Revenue Per Subscriber - Calculation and Segment Detail
We report our financial results in two segments - web presence and digital marketing.

  • Web presence. The web presence segment consists of our web hosting brands, including Bluehost and HostGator, as well as our domain-focused brands such as Domain.com, ResellerClub and LogicBoxes. This segment includes web hosting, website security, website design tools and services, e-commerce products, domain names and domain privacy. It also includes the sale of domain management services to resellers and end users, as well as premium domain names, and generates advertising revenue from domain name parking. The results presented below for the web presence segment include the former domain segment, which was consolidated into the web presence segment beginning with the first quarter of 2020.

  • Digital marketing. The digital marketing segment consists of Constant Contact email marketing tools and related products. This segment also generates revenue from sales of our Constant Contact-branded website builder tool, our Ecomdash inventory management and marketplace listing solution, and our Retention Science solution. For most of 2019, the digital marketing segment also included the SinglePlatform digital storefront business, which was sold on December 5, 2019.

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

 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2020 2019 2020
Consolidated revenue$277,193  $278,426  $836,080  $824,607 
Consolidated total subscribers4,780  4,965  4,780  4,965 
Consolidated average subscribers for the period4,774  4,921  4,791  4,865 
Consolidated ARPS$19.35  $18.86  $19.39  $18.83 
        
Web presence revenue$174,428  $178,064  $528,096  $528,714 
Web presence subscribers4,289  4,493  4,289  4,493 
Web presence average subscribers for the period4,283  4,449  4,298  4,395 
Web presence ARPS$13.57  $13.34  $13.65  $13.37 
        
Digital marketing revenue$102,765  $100,362  $307,984  $295,893 
Digital marketing subscribers491  472  491  472 
Digital marketing average subscribers for the period491  472  493  470 
Digital marketing ARPS$69.79  $70.81  $69.40  $69.91 



The following table presents revenue, gross profit, and a reconciliation by segment of net (loss) income calculated in accordance with GAAP to adjusted EBITDA (all data in thousands):

 Three Months Ended September 30, 2019
 Web presence Digital marketing Total
Revenue$174,428  $102,765  $277,193 
Gross profit$82,675  $73,763  $156,438 
      
Net (loss) income$(4,730) $12,546  $7,816 
Interest expense, net(1)17,153  18,599  35,752 
Income tax (benefit) expense(3,044) (1,795) (4,839)
Depreciation9,166  2,114  11,280 
Amortization of other intangible assets10,115  11,553  21,668 
Stock-based compensation5,842  3,301  9,143 
Restructuring expenses(36) (157) (193)
Gain on sale of intangible assets     
Gain on sale of business     
Transaction expenses and charges     
Impairment of goodwill and other long-lived assets     
Shareholder litigation reserve     
Adjusted EBITDA$34,466  $46,161  $80,627*



 Three Months Ended September 30, 2020
 Web presence Digital marketing Total
Revenue$178,064  $100,362  $278,426 
Gross profit$88,788  $72,976  $161,764 
      
Net (loss) income$(27) $6,701  $6,674 
Interest expense, net(1) { "@context": "https://schema.org", "@type": "FAQPage", "name": "Endurance International Group Reports 2020 Third Quarter Results FAQs", "mainEntity": [ { "@type": "Question", "name": "What were Endurance International Group's Q3 2020 financial results?", "acceptedAnswer": { "@type": "Answer", "text": "Endurance reported GAAP revenue of $278.4 million, net income of $6.7 million, and adjusted EBITDA of $78.7 million in Q3 2020." } }, { "@type": "Question", "name": "How did the total subscriber numbers change for EIGI in Q3 2020?", "acceptedAnswer": { "@type": "Answer", "text": "Total subscribers on the platform increased to approximately 4.965 million in Q3 2020, up from approximately 4.780 million in Q3 2019." } }, { "@type": "Question", "name": "What was the cash flow from operations for Endurance International Group in Q3 2020?", "acceptedAnswer": { "@type": "Answer", "text": "The cash flow from operations was $54.6 million in Q3 2020, marking a 33% increase from the previous year's $41.0 million." } }, { "@type": "Question", "name": "What is the free cash flow reported by EIGI for Q3 2020?", "acceptedAnswer": { "@type": "Answer", "text": "Endurance International Group reported free cash flow of $42.6 million for Q3 2020, a 53% increase from $27.8 million in Q3 2019." } }, { "@type": "Question", "name": "What challenges did Endurance International Group face in Q3 2020?", "acceptedAnswer": { "@type": "Answer", "text": "The company experienced a decrease in net income and adjusted EBITDA compared to the same quarter in the previous year." } } ] }

FAQ

What were Endurance International Group's Q3 2020 financial results?

Endurance reported GAAP revenue of $278.4 million, net income of $6.7 million, and adjusted EBITDA of $78.7 million in Q3 2020.

How did the total subscriber numbers change for EIGI in Q3 2020?

Total subscribers on the platform increased to approximately 4.965 million in Q3 2020, up from approximately 4.780 million in Q3 2019.

What was the cash flow from operations for Endurance International Group in Q3 2020?

The cash flow from operations was $54.6 million in Q3 2020, marking a 33% increase from the previous year's $41.0 million.

What is the free cash flow reported by EIGI for Q3 2020?

Endurance International Group reported free cash flow of $42.6 million for Q3 2020, a 53% increase from $27.8 million in Q3 2019.

What challenges did Endurance International Group face in Q3 2020?

The company experienced a decrease in net income and adjusted EBITDA compared to the same quarter in the previous year.

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