EIGI - Endurance International Group Reports 2019 Fourth Quarter and Full Year Results

Fourth Quarter 2019

• GAAP revenue of $277.2 million
• Net income of $9.6 million
• Adjusted EBITDA of $78.2 million
• Cash flow from operations of $46.3 million
• Free cash flow of $32.1 million

Fiscal Year 2019

• GAAP revenue of $1.113 billion
• Net loss of $12.3 million
• Adjusted EBITDA of $313.6 million
• Cash flow from operations of $162.0 million
• Free cash flow of $114.7 million
• Total subscribers on platform were approximately 4.766 million at December 31, 2019

BURLINGTON, Mass., Feb. 06, 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 fourth quarter and fiscal year ended December 31, 2019.

"Our focus on our core strategic brands and investing to increase the value we deliver to our customers resulted in continued financial progress in the fourth quarter," commented Jeffrey H. Fox, president and chief executive officer at Endurance International Group.  "After adjusting for the impact of the sale of our SinglePlatform business, we had positive net adds and our year over year revenue continued to progress toward inflection.  The team is focused on returning the company to growth, and we believe our revenue and subscriber trends reflect the substantial progress we have made in 2019."

Fourth Quarter and Full Year 2019 Financial Highlights

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

• Revenue for the fourth quarter of 2019 was $277.2 million, a decrease of 2 percent compared to $282.4 million in the fourth quarter of 2018.   Excluding the impact of SinglePlatform for both periods, revenue was $272.4 million compared to $275.1 million in the fourth quarter of 2018, a year over year decrease of 1 percent.
• Revenue for fiscal year 2019 was $1.113 billion, a decrease of 3 percent compared to $1.145 billion in fiscal year 2018.  Excluding the impact of SinglePlatform for both periods, fiscal 2019 revenue was $1.088 billion compared to $1.117 billion in fiscal 2018, a year over year decrease of 3 percent.
• Net income attributable to Endurance International Group Holdings, Inc. for the fourth quarter of 2019 was $9.6 million, or $0.07 per diluted share, compared to net income of $12.8 million, or $0.09 per diluted share, for the fourth quarter of 2018. For fiscal year 2019, net loss attributable to Endurance International Group Holdings, Inc. was $12.3 million, or $(0.09) per diluted share, compared to a net income of $4.5 million, or $0.03 per diluted share, for fiscal year 2018.
• Adjusted EBITDA for the fourth quarter of 2019 was $78.2 million, a decrease of 1 percent compared to $79.3 million in the fourth quarter of 2018. Adjusted EBITDA for fiscal year 2019 was $313.6 million, a decrease of 7 percent compared to $338.1 million in fiscal year 2018.
• Cash flow from operations for the fourth quarter of 2019 was $46.3 million, a decrease of 5 percent compared to $49.0 million for the fourth quarter of 2018. Cash flow from operations for fiscal year 2019 was $162.0 million, a decrease of 11 percent compared to $182.6 million for fiscal year 2018.
• Free cash flow, defined as cash flow from operations less capital expenditures and financed equipment obligations, for the fourth quarter of 2019 was $32.1 million, an increase of 36 percent compared to $23.6 million for the fourth quarter of 2018. Free cash flow for fiscal year 2019 was $114.7 million, a decrease of 11 percent compared to $129.2 million in fiscal year 2018.
• During fiscal year 2019, the company reduced the balance of its term loan by $131.0 million.

Full Year and Fourth Quarter Operating Highlights

• Total subscribers on platform at December 31, 2019 were approximately 4.766 million, compared to approximately 4.780 million subscribers at September 30, 2019 and 4.802 million subscribers at December 31, 2018. As a result of the SinglePlatform disposition in December 2019, total subscriber count was reduced by approximately 23,000 subscribers.  See “Total Subscribers” below.
• Average revenue per subscriber, or ARPS, for the fourth quarter of 2019 was $19.34, compared to $19.50 for the fourth quarter of 2018. ARPS for fiscal year 2019 was $19.35, compared to $19.37 for fiscal year 2018.

Fiscal 2020 Guidance

The company is providing the following guidance as of the date of this release, February 6, 2020.  For the full year ending December 31, 2020, the company expects:

In addition, the company expects cash flow from operations of approximately $160 million and free cash flow of approximately $110 million.

*As previously disclosed, the company sold its SinglePlatform business on December 5, 2019.  These figures represent 2019 revenue and adjusted EBITDA as if the company had sold this business prior to January 1, 2019. From January 1, 2019 until the sale date, the SinglePlatform business contributed approximately $25.4 million in GAAP revenue and $4.0 million in adjusted EBITDA (excluding the impact of corporate cost allocations).

Adjusted EBITDA and free cash flow are non-GAAP financial measures.  The company is unable to reconcile adjusted EBITDA guidance to GAAP without unreasonable efforts, as further discussed below in “Non-GAAP Financial Measures.”  A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP for past periods, as well as a reconciliation of free cash flow guidance to operating cash flow, 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 2019 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EST on Thursday, February 6, 2020.  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.  In this press release, we are also presenting the following additional non-GAAP financial measures for fiscal year 2019:  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 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.

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, 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.

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, since we will continue to incur these costs following the sale. 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).

Fiscal 2020 guidance included in this press release includes forward-looking guidance for adjusted EBITDA and FCF. A reconciliation of FCF guidance to cash flow from operations is included below. We are unable to reconcile our adjusted EBITDA guidance to net (loss) income because certain information necessary for this reconciliation is not available without unreasonable efforts since it is difficult to predict and/or dependent on future events that are outside of our control. In particular, we are unable to provide reasonable predictions of the following reconciling items: income tax expense (benefit), transaction expenses and charges, and impairment of goodwill and other long-lived assets. These items are difficult to predict with a reasonable degree of accuracy because of unanticipated changes in our GAAP effective income tax rate, a primary contributor to net income; uncertain or unanticipated acquisition costs; and unanticipated charges related to asset impairments. The impact of these items, in the aggregate, could be significant.  With respect to the other reconciling items, as of the date of this press release, we expect the following for 2020 (all amounts are estimated, approximate, and subject to change): interest expense (net) of $130 million, depreciation expense of $46 million, amortization expense for other intangible assets of $72 million, and stock-based compensation expense of $30 million.  At this time, we do not expect expenses in 2020 for the remaining reconciling items. These forward-looking estimates of reconciling items may different materially from our actual results and should not be relied upon as statements of fact.

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 2019.

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 our financial guidance for fiscal year 2020 and statements reflecting the expectation that we will return to year over year revenue growth in future periods. 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 or commercial disputes; 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 those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2018 filed with the SEC on February 21, 2019 and other reports we file with the SEC.

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

About Endurance International Group
Endurance International Group Holdings, Inc. (Nasdaq:EIGI) helps millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, Domain.com and SiteBuilder, among others. Headquartered in Burlington, Massachusetts, Endurance employs over 3,700 people across the United States, Brazil, India and the Netherlands. For more information, visit: www.endurance.com.

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

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:

(1) Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.
(*) Excluding SinglePlatform, which contributed approximately $4.0 million in adjusted EBITDA (excluding the impact of corporate cost allocations) in 2019, adjusted EBITDA would have been approximately $309.6 million.

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):

(1) 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 three year agreement for equipment financing. Capital expenditures during the three and twelve months ended December 31, 2019 includes $1.9 million and $8.2 million of principal payments under a two year agreement for equipment financing. The remaining balance on the equipment financing is $0.8 million as of December 31, 2019.

Average Revenue Per Subscriber - Calculation and Segment Detail

We present our financial results in the following three segments:

• Web presence. The web presence segment consists primarily of our web hosting brands, including Bluehost and HostGator. This segment also includes related products such as domain names, website security, website design tools and services, and e-commerce products.
• Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products. This segment also generates revenue from sales of our Constant Contact branded website builder tool and our Ecomdash inventory management and marketplace listing solution. For most of 2019, the email marketing segment also included the SinglePlatform digital storefront business, which we sold on December 5, 2019.
• Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with our domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to our web presence segment.

The following table presents the calculation of ARPS, on a consolidated basis and by segment:

(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 the SinglePlatform business.

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

(1) Revenue excludes intercompany transactions between the domain and web presence segments relating to domain sales and services of $2.4 million and $2.3 million for the three months ended December 31, 2018 and 2019, respectively, and $10.0 million and $9.8 million for the twelve months ended December 31, 2018 and 2019, 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 2020 Guidance (as of February 6, 2020) - Free Cash Flow

The following table reflects the reconciliation of fiscal year 2020 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2020 guidance for free cash flow. All figures shown are approximate.