EIGI - Endurance International Group Reports 2018 Fourth Quarter and Full Year Results

February, 07 2019 07:05 AM Endurance International Group Holdings Inc.

Fiscal Year 2018

GAAP revenue of $1.145 billion
Net income of $4.5 million
Adjusted EBITDA of $338.1 million
Cash flow from operations of $182.6 million
Free cash flow of $129.2 million
Total subscribers on platform were approximately 4.802 million at December 31, 2018

Fourth Quarter 2018

GAAP revenue of $282.4 million
Net income of $12.8 million
Adjusted EBITDA of $79.3 million
Cash flow from operations of $49.0 million
Free cash flow of $23.6 million

BURLINGTON, Mass., Feb. 07, 2019 (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 fourth quarter and fiscal year ended December 31, 2018.

"I am pleased with our financial performance in 2018. The Endurance team made substantial strategic and operational progress while delivering to our 2018 integrated operating plan," commented Jeffrey H. Fox, president and chief executive officer at Endurance International Group. "In 2019, we will continue to simplify our operations and maintain focus on increasing the value we deliver to customers on our strategic brands, which we believe provides a foundation for growth."

Full Year and Fourth Quarter 2018 Financial Highlights

For fiscal year 2018, revenue was $1.145 billion, a decrease of 3 percent compared to $1.177 billion in fiscal 2017. Revenue for the fourth quarter of 2018 was $282.4 million, a decrease of 4 percent compared to $294.2 million in the fourth quarter of 2017.
For fiscal year 2018, net income was $4.5 million compared to a net loss of $99.8 million for fiscal 2017. Net income for the fourth quarter of 2018 was $12.8 million compared to net income of $7.5 million for the fourth quarter of 2017.
For fiscal year 2018, net income attributable to Endurance International Group Holdings, Inc. was $4.5 million, or $0.03 per diluted share, compared to a net loss of $107.3 million, or $(0.78) per diluted share, for fiscal 2017. Net income attributable to Endurance International Group Holdings, Inc. for the fourth quarter of 2018 was $12.8 million, or $0.09 per diluted share, compared to net income of $7.5 million, or $0.05 per diluted share, for the fourth quarter of 2017.
Adjusted EBITDA for fiscal year 2018 was $338.1 million, a decrease of 4 percent compared to $350.8 million in fiscal 2017. Adjusted EBITDA for the fourth quarter of 2018 was $79.3 million, a decrease of 16 percent compared to $94.4 million in the fourth quarter of 2017.
Cash flow from operations for fiscal year 2018 was $182.6 million, a decrease of 9 percent compared to $201.3 million for fiscal 2017. Cash flow from operations for the fourth quarter of 2018 was $49.0 million, a decrease of 32 percent compared to $72.4 million for the fourth quarter of 2017.
Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment, for fiscal year 2018 was $129.2 million, a decrease of 14 percent compared to $150.8 million in fiscal 2017. Free cash flow for the fourth quarter of 2018 was $23.6 million, a decrease of 61 percent compared to $59.7 million for the fourth quarter of 2017.
During fiscal 2018, the company reduced the balance of its term loan by $100.8 million.

Full Year and Fourth Quarter Operating Highlights

Total subscribers on platform at December 31, 2018 were approximately 4.802 million, compared to approximately 4.852 million subscribers at September 30, 2018 and 5.051 million subscribers at December 31, 2017. See “Total Subscribers” below.
Average revenue per subscriber, or ARPS, for fiscal year 2018 was $19.37, compared to $18.82 for fiscal year 2017. ARPS for the fourth quarter of 2018 was $19.50, compared to $19.28 for the fourth quarter of 2017.

Fiscal 2019 Guidance

The company is providing the following guidance as of the date of this release, February 7, 2019. For the full year ending December 31, 2019, the company expects:

2018 Actual
As reported

Guidance
(as of February 7, 2019)

GAAP revenue

$1.145 billion

$1.140 to $1.160 billion

Adjusted EBITDA

$338 million

$310 to $330 million

Free cash flow

$129 million

$115 to $125 million

Adjusted EBITDA and free cash flow are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP is provided in the financial statement tables included at the end of this press release.

Conference Call and Webcast Information

Endurance International Group’s fourth quarter and full year 2018 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EST on Thursday, February 7, 2019. To participate on the live call, analysts and investors should dial (888) 734-0328 at least ten minutes prior to the call. Endurance International Group will also offer a live and archived webcast of the conference call, accessible from the Investor Relations section of the company’s website at http://ir.endurance.com.

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, we use adjusted EBITDA and free cash flow, which are non-GAAP financial measures, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP or includes amounts that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.

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

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

Free Cash Flow, or FCF, is a non-GAAP financial measure that we calculate as cash flow from operations less capital expenditures and financed equipment. 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. There were no adjustments in the fourth quarter of 2018.

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

Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements concerning our financial guidance for fiscal year 2019; our belief that our continuing efforts to simplify our operations and increase the value we deliver to customers will provide a foundation for growth;; and our expected financial and operational performance in general. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts, and statements identified by words such as “expects,” “believes,” “estimates,” “may,” “continue,” “positions,” “confident,” and variations of such words or words of similar meaning and the use of future dates. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that these plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: the possibility that our financial guidance may differ from expectations; the possibility that our planned investment initiatives will not result in the anticipated benefits to our business; the possibility that we will continue to experience decreases in our subscriber base; an adverse impact on our business from litigation or regulatory proceedings; an adverse impact on our business from our substantial indebtedness and the cost of servicing our debt; the rate of growth of the Small and Medium Business (“SMB”) market for our solutions; our inability to grow our subscriber base, increase sales to our existing subscribers, or retain our existing subscribers; system or Internet failures; our inability to maintain or improve our competitive position or market share; and other risks and uncertainties discussed in our filings with the SEC, including the “Risk Factors” section of our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and other reports we file with the SEC.

We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

About Endurance International Group

Endurance International Group Holdings, Inc. (NASDAQ:EIGI) helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, Domain.com and SiteBuilder, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,800 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) 482-5809
press@endurance.com

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


December 31, 2017

December 31, 2018
Assets



Current assets:



Cash and cash equivalents
$
66,493


$
88,644

Restricted cash
2,625


1,932

Accounts receivable
15,945


12,205

Prepaid domain name registry fees
53,805


56,779

Prepaid commissions
–


41,458

Prepaid and refundable taxes
4,367


7,235

Prepaid expenses and other current assets
23,908


27,855

Total current assets
167,143


236,108

Property and equipment–net
95,452


92,275

Goodwill
1,850,582


1,849,065

Other intangible assets–net
455,440


352,516

Deferred financing costs
3,189


2,656

Investments
15,267


15,000

Prepaid domain name registry fees, net of current portion
10,806


11,207

Prepaid commissions, net of current portion
–


42,472

Other assets
2,155


5,208

Total assets
$
2,600,034


$
2,606,507

Liabilities and stockholders’ equity



Current liabilities:



Accounts payable
11,058


12,449

Accrued expenses
78,601


79,279

Accrued taxes
338


2,498

Accrued interest
24,457


25,259

Deferred revenue
361,940


371,758

Current portion of notes payable
33,945


31,606

Current portion of financed equipment
7,630


8,379

Deferred consideration–short term
4,365


2,425

Other current liabilities
4,031


3,147

Total current liabilities
526,365


536,800

Long-term deferred revenue
90,972


96,140

Notes payable–long term, net of original issue discounts of $25,811 and $21,349, and deferred financing costs of $37,736 and $31,992, respectively
1,858,300


1,770,055

Financed equipment–long term
7,719


–

Deferred tax liability
19,696


16,457

Deferred consideration–long term
3,551


1,364

Other liabilities
10,426


11,237

Total liabilities
2,517,029


2,432,053

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; 140,190,695 and 143,444,515 shares issued at December 31, 2017 and December 31, 2018, respectively; 140,190,695 and 143,444,178 outstanding at December 31, 2017 and December 31, 2018, respectively
14


14

Additional paid-in capital
931,033


961,235

Accumulated other comprehensive loss
(541
)

(3,211
)
Accumulated deficit
(847,501
)

(783,584
)
Total stockholders’ equity
83,005


174,454

Total liabilities and stockholders’ equity
$
2,600,034


$
2,606,507

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 December 31,

Twelve Months Ended December 31,

2017

2018

2017

2018
Revenue
$
294,250


$
282,395


$
1,176,867


$
1,145,291

Cost of revenue
149,733


127,140


603,930


520,737

Gross profit
144,517


155,255


572,937


624,554

Operating expense:







Sales and marketing
66,306


67,691


277,460


265,424

Engineering and development
18,379


23,421


78,772


87,980

General and administrative
33,043


28,992


163,972


124,204

Impairment of goodwill
12,129


–


12,129


–

Transaction expenses
–


–


773


–

Total operating expense
129,857


120,104


533,106


477,608

Income from operations
14,660


35,151


39,831


146,946

Other income (expense):







Other income (loss), net
–


–


(600
)

–

Interest income
230


369


736


1,089

Interest expense
(36,120
)

(37,557
)

(157,142
)

(149,480
)
Total other expense–net
(35,890
)

(37,188
)

(157,006
)

(148,391
)
Loss before income taxes and equity earnings of unconsolidated entities
(21,230
)

(2,037
)

(117,175
)

(1,445
)
Income tax benefit
(28,665
)

(15,072
)

(17,281
)

(6,246
)
Income (loss) before equity earnings of unconsolidated entities
7,435


13,035


(99,894
)

4,801

Equity (income) loss of unconsolidated entities, net of tax
(38
)

265


(110
)

267

Net income (loss)
$
7,473


$
12,770


$
(99,784
)

$
4,534

Net loss attributable to non-controlling interest
–


–


277


–

Excess accretion of non-controlling interest
–


–


7,247


–

Total net loss attributable to non-controlling interest
–


–


7,524


–

Net income (loss) attributable to Endurance International Group Holdings, Inc.
$
7,473


$
12,770


$
(107,308
)

$
4,534

Comprehensive income (loss):







Foreign currency translation adjustments
107


256


3,091


(2,233
)
Unrealized gain (loss) on cash flow hedge, net of taxes of $192 and ($763) and $11 and ($137) for the three and twelve months ended December 31, 2017 and 2018, respectively
343


(2,433
)

34


(437
)
Total comprehensive income (loss)
$
7,923


$
10,593


$
(104,183
)

$
1,864

Net income (loss) per share attributable to Endurance International Group Holdings, Inc.–basic
$
0.05


$
0.09


$
(0.78
)

$
0.03

Net income (loss) per share attributable to Endurance International Group Holdings, Inc.–diluted
$
0.05


$
0.09


$
(0.78
)

$
0.03

Weighted-average number of common shares used in computing net income (loss) per share attributable to Endurance International Group Holdings, Inc.–basic
138,921,118


143,415,944


137,322,201


142,316,993

Weighted-average number of common shares used in computing net income (loss) per share attributable to Endurance International Group Holdings, Inc.–diluted
141,307,988


145,228,986


137,322,201


145,669,760

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


Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2018

2017

2018
Cash flows from operating activities:







Net income (loss)
$
7,473


$
12,770


$
(99,784
)

$
4,534

Adjustments to reconcile net income (loss) to net cash provided by operating activities:







Depreciation of property and equipment
14,452


11,454


55,185


48,207

Amortization of other intangible assets from acquisitions
35,800


25,258


140,354


103,148

Amortization of deferred financing costs
1,913


1,746


7,316


6,454

Amortization of net present value of deferred consideration
128


62


632


373

Amortization of original issuance discount
1,069


1,096


3,860


4,305

Impairment of long-lived assets
4,883


–


18,731


–

Impairment of investments
–


–


600


–

Impairment of goodwill
12,129


–


12,129


–

Stock-based compensation
11,252


7,132


60,001


29,064

Deferred tax benefit
(26,700
)

(19,277
)

(22,807
)

(10,438
)
(Gain) loss on sale of assets
2


7


(315
)

198

Gain from unconsolidated entities
(38
)

–


(110
)

–

Loss of unconsolidated entities
–


265


–


267

Financing costs expensed
–


–


5,487


1,228

Loss on early extinguishment of debt
–


–


992


331

Dividend from minority interest
–


–


100


–

Changes in operating assets and liabilities:







Accounts receivable
(2,230
)

1,929


(3,102
)

3,616

Prepaid expenses and other current assets
3,396


(8,726
)

5,435


(11,759
)
Accounts payable and accrued expenses
15,643


25,060


8,334


9,339

Deferred revenue
(6,765
)

(9,817
)

8,235


(6,315
)
Net cash provided by operating activities
72,407


48,959


201,273


182,552

Cash flows from investing activities:







Purchases of property and equipment
(10,967
)

(23,537
)

(43,062
)

(45,880
)
Proceeds from sale of assets
238


–


530


6

Purchases of intangible assets
–


(8
)

(1,966
)

(8
)
Net cash used in investing activities
(10,729
)

(23,545
)

(44,498
)

(45,882
)
Cash flows from financing activities:







Proceeds from issuance of term loan
–


–


1,693,007


1,580,305

Repayment of term loan
(64,487
)

(25,000
)

(1,797,634
)

(1,681,094
)
Payment of financing costs
–


–


(6,304
)

(1,580
)
Payment of deferred consideration
(25
)

–


(5,433
)

(4,500
)
Payment of redeemable non-controlling interest liability
–


–


(25,000
)

–

Principal payments on financed equipment
(1,711
)

(1,830
)

(7,390
)

(7,439
)
Proceeds from exercise of stock options
501


131


2,049


887

Net cash provided by (used in) financing activities
(65,722
)

(26,699
)

(146,705
)

(113,421
)
Net effect of exchange rate on cash and cash equivalents and restricted cash
(6
)

355


2,150


(1,791
)
Net increase in cash and cash equivalents and restricted cash
(4,050
)

(930
)

12,220


21,458

Cash and cash equivalents and restricted cash:







Beginning of period
73,168


91,506


56,898


69,118

End of period
$
69,118


$
90,576


$
69,118


$
90,576

Supplemental cash flow information:







Interest paid
$
22,281


$
24,006


$
141,157


$
134,145

Income taxes paid
$
(589
)

$
416


$
3,369


$
4,141

Supplemental disclosure of non-cash financing activities:







Assets acquired under equipment financing
$
12,408


$
1,179


$
15,536


$
1,179

GAAP to Non-GAAP reconciliation - Adjusted EBITDA

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


Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2018

2017

2018
Net income (loss)
$
7,473


$
12,770


$
(99,784
)

$
4,534

Interest expense, net⁽¹⁾
35,890


37,188


156,406


148,391

Income tax expense (benefit)
(28,665
)

(15,072
)

(17,281
)

(6,246
)
Depreciation
14,452


11,454


55,185


48,207

Amortization of other intangible assets
35,800


25,258


140,354


103,148

Stock-based compensation
11,252


7,132


60,001


29,064

Restructuring expenses
1,226


347


15,810


3,368

Transaction expenses and charges
–


–


773


–

(Gain) loss of unconsolidated entities
(38
)

265


(110
)

267

Impairment of other long-lived assets
17,012


–


31,460


–

SEC investigations reserve
–


–


8,000


–

Shareholder litigation reserve
–


–


–


7,325

Adjusted EBITDA
$
94,402


$
79,342


$
350,814


$
338,058

(1) Interest expense includes impact of amortization of deferred financing costs, original issue 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 December 31,

Twelve Months Ended December 31,

2017


2018


2017


2018

Cash flow from operations
$
72,407


$
48,959


$
201,273


$
182,552

Less:







Capital expenditures and financed equipment⁽¹⁾
(12,678
)

(25,367
)

(50,452
)

(53,319
)








Free cash flow
$
59,729


$
23,592


$
150,821


$
129,233

(1) Capital expenditures during the three and twelve months ended December 31, 2017 includes $1.7 million and $7.4 million of principal payments under a three year agreement for equipment financing. Capital expenditures during the three and twelve months ended December 31, 2018 includes $1.8 million and $7.4 million of principal payments under a two year agreement for equipment financing. The remaining balance on the equipment financing is $8.4 million as of December 31, 2018.

Average Revenue Per Subscriber - Calculation and Segment Detail

We present our financial results in the following three segments:

Web presence. The web presence segment consists primarily of our web hosting brands and related products such as website security, website design tools and services, and e-commerce products.
Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the SinglePlatform digital storefront product.
Domain. The domain segment consists of domain-focused brands and certain web hosting brands that are aligned 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.

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 December 31,

Twelve Months Ended December 31,

2017

2018

2017

2018
Consolidated revenue
$
294,250


$
282,395


$
1,176,867


$
1,145,291

Consolidated total subscribers
5,051


4,802


5,051


4,802

Consolidated average subscribers
5,087


4,827


5,211


4,927

Consolidated average revenue per subscriber (ARPS)
$
19.28


$
19.50


$
18.82


$
19.37









Web presence revenue
$
158,332


$
147,712


$
641,993


$
605,315

Web presence subscribers
3,849


3,639


3,849


3,639

Web presence average subscribers
3,903


3,661


4,024


3,744

Web presence ARPS
$
13.52


$
13.45


$
13.29


$
13.47









Email marketing revenue
$
102,849


$
103,340


$
401,250


$
410,052

Email marketing subscribers
519


497


519


497

Email marketing average subscribers
521


498


531


508

Email marketing ARPS
$
65.79


$
69.22


$
62.92


$
67.28









Domain revenue
$
33,069


$
31,343


$
133,624


$
129,924

Domain subscribers
683


666


683


666

Domain average subscribers
663


668


656


675

Domain ARPS
$
16.63


$
15.63


$
16.98


$
16.05

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


Three Months Ended December 31, 2018

Web presence
Email marketing
Domain
Total


Revenue⁽¹⁾
$
147,712

$
103,340

$
31,343

$
282,395

Gross profit
$
72,441

$
73,114

$
9,700

$
155,255






Net income (loss)
$
(1,985
)
$
16,278

$
(1,523
)
$
12,770

Interest expense, net⁽²⁾
$
17,453

$
17,451

$
2,284

$
37,188

Income tax benefit
$
(5,921
)
$
(7,894
)
$
(1,257
)
$
(15,072
)
Depreciation
$
8,146

$
2,407

$
901

$
11,454

Amortization of other intangible assets
$
11,208

$
13,384

$
666

$
25,258

Stock-based compensation
$
3,934

$
2,470

$
728

$
7,132

Restructuring expenses
$
481

$
(134
)
$
–

$
347

Transaction expenses and charges
$
–

$
–

$
–

$
–

(Gain) loss of unconsolidated entities
$
265

$
–

$
–

$
265

Impairment of other long-lived assets
$
–

$
–

$
–

$
–

SEC investigations reserve
$
–

$
–

$
–

$
–

Shareholder litigation reserve
$
–

$
–

$
–

$
–

Adjusted EBITDA
$
33,581

$
43,962

$
1,799

$
79,342







Twelve Months Ended December 31, 2018

Web presence
Email marketing
Domain
Total





Revenue⁽¹⁾
$
605,315

$
410,052

$
129,924

$
1,145,291

Gross profit
$
297,590

$
288,023

$
38,941

$
624,554






Net income (loss)
$
(22,534
)
$
38,628

$
(11,560
)
$
4,534

Interest expense, net⁽²⁾
$
70,956

$
68,317

$
9,118

$
148,391

Income tax benefit
$
(4,961
)
$
115

$
(1,400
)
$
(6,246
)
Depreciation
$
32,915

$
11,497

$
3,795

$
48,207

Amortization of other intangible assets
$
47,020

$
53,100

$
3,028

$
103,148

Stock-based compensation
$
16,000

$
9,638

$
3,426

$
29,064

Restructuring expenses
$
2,135

$
589

$
644

$
3,368

Transaction expenses and charges
$
–

$
–

$
–

$
–

(Gain) loss of unconsolidated entities
$
267

$
–

$
–

$
267

Impairment of other long-lived assets
$
–

$
–

$
–

$
–

SEC investigations reserve
$
–

$
–

$
–

$
–

Shareholder litigation reserve
$
4,780

$
1,500

$
1,045

$
7,325

Adjusted EBITDA
$
146,578

$
183,384

$
8,096

$
338,058


Three months ended December 31, 2017

Web presence
Email marketing
Domain
Total


Revenue⁽¹⁾
$
158,332

$
102,849

$
33,069

$
294,250

Gross profit
$
76,402

$
66,760

$
1,355

$
144,517






Net income (loss)
$
2,264

$
(2,589
)
$
7,798

$
7,473

Interest expense, net⁽²⁾
$
16,614

$
18,702

$
574

$
35,890

Income tax expense (benefit)
$
(8,582
)
$
9,973

$
(30,056
)
$
(28,665
)
Depreciation
$
10,233

$
3,280

$
939

$
14,452

Amortization of other intangible assets
$
15,846

$
18,770

$
1,184

$
35,800

Stock-based compensation
$
8,618

$
1,542

$
1,092

$
11,252

Restructuring expenses
$
187

$
838

$
201

$
1,226

Transaction expenses and charges
$
–

$
–

$
–

$
–

(Gain) loss of unconsolidated entities
$
(38
)
$
–

$
–

$
(38
)
Impairment of other long-lived assets
$
–

$
–

$
17,012

$
17,012

SEC investigations reserve
$
–

$
–

$
–

$
–

Shareholder litigation reserve
$
–

$
–

$
–

$
–

Adjusted EBITDA
$
45,142

$
50,516

$
(1,256
)
$
94,402







Twelve months ended December 31, 2017

Web presence
Email marketing
Domain
Total


Revenue⁽¹⁾
$
641,993

$
401,250

$
133,624

$
1,176,867

Gross profit
$
305,588

$
254,941

$
12,408

$
572,937






Net income (loss)
$
(64,962
)
$
(10,615
)
$
(24,207
)
$
(99,784
)
Interest expense, net⁽²⁾
$
67,491

$
86,914

$
2,001

$
156,406

Income tax expense (benefit)
$
4,063

$
5,152

$
(26,496
)
$
(17,281
)
Depreciation
$
37,634

$
13,912

$
3,639

$
55,185

Amortization of other intangible assets
$
60,277

$
74,467

$
5,610

$
140,354

Stock-based compensation
$
46,641

$
6,934

$
6,426

$
60,001

Restructuring expenses
$
9,131

$
5,581

$
1,098

$
15,810

Transaction expenses and charges
$
–

$
773

$
–

$
773

(Gain) loss of unconsolidated entities
$
(110
)
$
–

$
–

$
(110
)
Impairment of other long-lived assets
$
600

$
–

$
30,860

$
31,460

SEC investigations reserve
$
4,323

$
2,751

$
926

$
8,000

Shareholder litigation reserve
$
–

$
–

$
–

$
–

Adjusted EBITDA
$
165,088

$
185,869

$
(143
)
$
350,814

(1) Revenue excludes intercompany transactions relating to domain sales and domain services from the domain segment to the web presence segment of $2.2 million and $2.4 million for the three months ended December 31, 2017 and 2018, respectively, and $10.3 million and $10.0 million for the twelve months ended December 31, 2017 and 2018, respectively.
(2) Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income.

GAAP to Non-GAAP Reconciliation of Fiscal Year 2019 Guidance (as of February 7, 2019) - Adjusted EBITDA

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

($ in millions)
Twelve Months Ending December 31, 2019
Estimated net loss
$
2

$
11

Estimated interest expense (net)
145

147

Estimated income tax expense (benefit)
(2
)
(4
)
Estimated depreciation
46

50

Estimated amortization of acquired intangible assets
83

85

Estimated stock-based compensation
33

37

Estimated restructuring expenses
3

4

Estimated transaction expenses and charges
–

–

Estimated (gain) loss of unconsolidated entities
–

–

Estimated impairment of other long-lived assets
–

–

Adjusted EBITDA guidance
$
310

$
330

GAAP to Non-GAAP Reconciliation of Fiscal Year 2019 Guidance (as of February 7, 2019) - Free Cash Flow

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

($ in millions)
Twelve Months Ending December 31, 2019
Estimated cash flow from operations
$
165

$
180

Estimated capital expenditures and financed equipment
(50
)
(55
)
Free cash flow guidance
$
115

$
125

Company Name:	Endurance International Group Holdings Inc.
Stock Symbol:	EIGI
Market:	NASDAQ
Website:	endurance.com

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