Endurance International Group Reports 2017 Fourth Quarter and Full Year Results

Fiscal Year 2017

• GAAP revenue of $1.177 billion
• Net loss of $99.8 million
• Adjusted EBITDA of $350.8 million
• Cash flow from operations of $201.3 million
• Free cash flow of $150.8 million
• Total subscribers on platform were approximately 5.051 million at year end 2017

Fourth Quarter 2017

• GAAP revenue of $294.2 million
• Net income of $7.5 million
• Adjusted EBITDA of $94.4 million
• Cash flow from operations of $72.4 million
• Free cash flow of $59.7 million

BURLINGTON, Mass., Feb. 13, 2018 (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, 2017.

“We are pleased with the profit and cash flow we generated in the fourth quarter,” commented Jeffrey H. Fox, president and chief executive officer of Endurance International Group.  “We enter 2018 focused on simplifying our operations and increasing investment in our market-leading brands. We are focused on increasing the value we deliver to our customers as we integrate our assets to operate more effectively at scale."

Full Year and Fourth Quarter 2017 Financial Highlights

• For fiscal year 2017, revenue was $1.177 billion, an increase of 6 percent compared to $1.111 billion in fiscal 2016.  Revenue for the fourth quarter of 2017 was $294.2 million, an increase of 1 percent compared to $292.1 million in the fourth quarter of 2016.
• For fiscal year 2017, net loss was $99.8 million compared to a net loss of $81.2 million for fiscal 2016.  Net income for the fourth quarter of 2017 was $7.5 million compared to a net loss of $32.1 million for the fourth quarter of 2016.
• For fiscal year 2017, net loss attributable to Endurance International Group Holdings, Inc. was $107.3 million, or $(0.78) per diluted share, compared to a net loss of $72.8 million, or $(0.55) per diluted share, for fiscal 2016.  Net income attributable to Endurance International Group Holdings, Inc. for the fourth quarter of 2017 was $7.5 million, or $0.05 per diluted share, compared to a net loss of $34.9 million, or $(0.26) per diluted share, for the fourth quarter of 2016. 
• Adjusted EBITDA for fiscal year 2017 was $350.8 million, an increase of 22 percent compared to $288.4 million in fiscal 2016.  Adjusted EBITDA for the fourth quarter of 2017 was $94.4 million, an increase of 9 percent compared to $87.0 million in the fourth quarter of 2016. 
• Cash flow from operations for fiscal year 2017 was $201.3 million, an increase of 30 percent compared to $155.0 million for fiscal 2016.  Cash flow from operations for the fourth quarter of 2017 was $72.4 million, an increase of 36 percent compared to $53.2 million for the fourth quarter of 2016. 
• Free cash flow, defined as cash flow from operations less capital expenditures and capital lease obligations, for fiscal year 2017 was $150.8 million, an increase of 35 percent compared to $111.8 million in fiscal 2016.  Free cash flow for the fourth quarter of 2017 was $59.7 million, an increase of 37 percent compared to $43.7 million for the fourth quarter of 2016. 
• During fiscal 2017, the company reduced the balance of its term loan by $100.4 million.

Full Year and Fourth Quarter Operating Highlights

• Total subscribers on platform at December 31, 2017 were approximately 5.051 million, compared to approximately 5.122 million subscribers at September 30, 2017 and 5.371 million subscribers at December 31, 2016.  See “Total Subscribers” below. 
• Average revenue per subscriber, or ARPS, for fiscal year 2017 was $18.82, compared to $17.53 for fiscal year 2016.  ARPS for the fourth quarter of 2017 was $19.28, compared to $18.02 for the fourth quarter of 2016.

Fiscal 2018 Guidance

The company is providing the following guidance as of the date of this release, February 13, 2018.  For the full year ending December 31, 2018, the company expects:

Free cash flow guidance does not include the impact of potential settlements of pending legal proceedings.  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 2017 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EST on Tuesday, February 13, 2018.  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, and SEC investigations 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 capital lease obligations. 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 capital lease obligations).

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 fourth quarter of 2017, these adjustments had a net negative impact of approximately 700 subscribers on our total subscriber count.

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 2018, our expectations regarding our 2018 priorities and investment plans, the ability of these investments to drive future growth and long-term value, 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 (including due to our payment of any potential settlements of pending legal proceedings); 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, 2017 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) (em)Powers millions of small businesses worldwide with products and technology to enhance their online web presence, email marketing, mobile 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 3,600 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

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):

(1) Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.
(2) The (gain) loss of unconsolidated entities includes our proportionate share of net (gains) losses from unconsolidated entities, (gains) losses from revaluation of our existing investments to their implied fair values if and when we obtain control of the equity investee, and impairment charges, if any.
         

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, 2016 includes $1.5 million and $5.9 million of principal payments under a three year capital lease for software. 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 two year capital lease for software. The remaining balance on the capital lease is $15.3 million as of December 31, 2017.

Average Revenue Per Subscriber - Calculation and Segment Detail

Starting with the fourth quarter of 2017, we will 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 the 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):

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

(1) Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.
(2) The (gain) loss of unconsolidated entities includes our proportionate share of net (gains) losses from unconsolidated entities, (gains) losses from revaluation of our existing investments to their implied fair values if and when we obtain control of the equity investee, and impairment charges, if any.

GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of February 13, 2018) - Adjusted EBITDA

The following table reflects the reconciliation of fiscal year 2018 estimated net loss calculated in accordance with GAAP to fiscal year 2018 guidance for adjusted EBITDA. All figures shown are approximate.

GAAP to Non-GAAP Reconciliation of Fiscal Year 2018 Guidance (as of February 13, 2018) - Free Cash Flow

The following table reflects the reconciliation of fiscal year 2018 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2018 guidance for free cash flow. All figures shown are approximate.