GlobeNewswire Inc | Nov 2, 2020 07:31AM EST

November 02, 2020

-- 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 September30, 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 September30, 2020.

In light of Endurances 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 $79.6million, excluding SinglePlatform. Adjusted EBITDA in the third quarter of 2019 was $80.6 million, including the contribution of approximately $1.1million 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 September30, 2020 were approximately 4.965 million, compared to approximately 4.780 million subscribers at September30, 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 WhiteEndurance International Group(781) 852-3450ir@endurance.com

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

Non-GAAP Financial MeasuresIn 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 companys 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 MetricsTotal 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, September 30, 2019 2020Assets (unaudited)Current assets: Cash and cash equivalents $ 111,265 $ 167,315 Restricted cash 1,732 1,422 Accounts receivable 10,224 9,823 Prepaid domain name registry fees 55,237 58,377 Prepaid commissions 38,435 42,042 Prepaid and refundable taxes 6,810 5,175 Prepaid expenses and other current assets 23,883 22,748 Total current assets 247,586 306,902 Property and equipment?net 85,925 88,349 Operating lease right-of-use assets 90,519 83,224 Goodwill 1,835,310 1,852,780 Other intangible assets?net 245,002 207,579 Deferred financing costs?net 1,778 1,119 Investments 15,000 15,000 Prepaid domain name registry fees, net of current 11,107 12,808 portionPrepaid commissions, net of current portion 48,780 60,864 Deferred tax asset 64 232 Other assets 3,015 2,923 Total assets $ 2,584,086 $ 2,631,780 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 10,054 $ 13,670 Accrued expenses 64,560 72,534 Accrued taxes 251 461 Accrued interest 23,434 12,360 Deferred revenue 369,475 388,500 Operating lease liabilities?short term 21,193 18,090 Current portion of notes payable 31,606 31,606 Current portion of financed equipment 790 2,447 Deferred consideration?short term 2,201 7,790 Other current liabilities 2,165 2,846 Total current liabilities 525,729 550,304 Long-term deferred revenue 99,652 105,418 Operating lease liabilities?long term 78,151 74,461 Notes payable?long term, net of original issuediscounts of $16,859 and $13,101 and deferred 1,649,867 1,623,171 financing costs of $25,690 and $20,210,respectivelyFinanced equipment?long term ? 202 Deferred tax liability 27,097 34,864 Deferred consideration?long term ? 7,087 Other liabilities 6,636 13,552 Total liabilities 2,387,132 2,409,059 Stockholders? equity: Preferred Stock?par value $0.0001; 5,000,000shares authorized; no shares issued or ? ? outstandingCommon Stock?par value $0.0001; 500,000,000shares authorized; 146,259,868 and 147,570,072shares issued at December 31, 2019 and 15 16 September30, 2020, respectively; 146,259,868 and141,507,297 outstanding at December 31, 2019 andSeptember30, 2020, respectivelyAdditional paid-in capital 996,958 1,021,621 Treasury stock, at cost, 0 and 6,062,775 sharesat December 31, 2019 and September30, 2020, ? (10,048 )respectivelyAccumulated other comprehensive loss (4,088 ) (1,965 )Accumulated deficit (795,931 ) (786,903 )Total stockholders? equity 196,954 222,721 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 Nine Months Ended September 30, 30, 2019 2020 2019 2020Revenue $ 277,193 $ 278,426 $ 836,080 $ 824,607 Cost of revenue(includingimpairment of $0and $17,892 forthe three and 120,755 116,662 384,196 345,991 nine months endedSeptember 30,2019,respectively)Gross profit 156,438 161,764 451,884 478,616 Operating expense:Sales and 59,143 63,651 191,221 193,904 marketingEngineering and 28,257 28,425 77,299 79,958 developmentGeneral and 30,309 31,160 92,826 90,937 administrativeGain on sale of ? ? ? (2,365 )intangible assetsTransaction ? 461 ? 461 expensesTotal operating 117,709 123,697 361,346 362,895 expenseIncome from 38,729 38,067 90,538 115,721 operationsOther income (expense):Interest income 305 153 910 485 Interest expense (36,057 ) (29,959 ) (110,308 ) (93,879 )Total other (35,752 ) (29,806 ) (109,398 ) (93,394 )expense?netIncome (loss)before income 2,977 8,261 (18,860 ) 22,327 taxesIncome tax (4,839 ) 1,587 3,040 13,299 (benefit) expenseNet income (loss) $ 7,816 $ 6,674 (21,900 ) 9,028 Comprehensive income (loss):Foreign currencytranslation (1,001 ) 1,245 (1,054 ) 1,122 adjustmentsUnrealized gain(loss) on cashflow hedge, netof tax benefit(expense) of $(70) and $200 forthe three andnine months endedSeptember 30, 240 286 (611 ) 1,001 2019,respectively, and$(92) and $(323)for the three andnine months endedSeptember 30,2020,respectivelyTotalcomprehensive $ 7,055 $ 8,205 $ (23,565 ) $ 11,151 income (loss)Basic net income $ 0.05 $ 0.05 $ (0.15 ) $ 0.06 (loss) per shareDiluted netincome (loss) per $ 0.05 $ 0.05 $ (0.15 ) $ 0.06 shareWeighted-averagecommon sharesused in computing net income (loss)per share:Basic 145,951,755 141,680,469 144,932,834 143,552,324 Diluted 146,301,595 147,178,734 144,932,834 147,334,403

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

Three Months Ended Nine Months Ended September 30, September 30, 2019 2020 2019 2020Cash flows from operating activities:Net income (loss) $ 7,816 $ 6,674 $ (21,900 ) $ 9,028 Adjustments to reconcilenet income (loss) to net cash provided by operatingactivities:Depreciation of property 11,280 12,824 33,385 38,266 and equipmentAmortization of other 21,668 17,813 64,137 52,406 intangible assetsImpairment of long-lived ? ? 17,892 ? assetsAmortization of deferred 1,822 1,978 5,331 5,770 financing costsAmortization of netpresent value of deferred 23 331 143 376 considerationAmortization of original 1,138 1,255 3,336 3,622 issue discountsStock-based compensation 9,143 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 ? ? ? (2,365 )assetsLoss on early ? ? ? 83 extinguishment of debtChanges in operatingassets and liabilities, net of acquisitions:Accounts receivable 827 1,743 34 893 Prepaid and refundable (6,633 ) 108 (5,908 ) 1,620 taxesPrepaid expenses and other 2,780 (1,979 ) 5,108 (20,069 )current assetsLeases right-of-use asset, (258 ) 201 395 519 netAccounts payable and (8,357 ) (3,858 ) (23,492 ) 4,416 accrued expensesDeferred revenue 395 6,920 7,636 27,222 Net cash provided by 40,951 54,569 115,680 157,232 operating activitiesCash flows from investing activities:Businesses acquired inpurchase transactions, net (8,875 ) (16,998 ) (8,875 ) (16,998 )of cash acquiredPurchases of property and (10,632 ) (10,264 ) (26,796 ) (30,273 )equipmentProceeds from sale of 1 ? 1 ? assetsProceeds from sale of ? ? ? 2,705 intangible assetsNet cash used in investing (19,506 ) (27,262 ) (35,670 ) (44,566 )activitiesCash 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 (2,471 ) (1,749 ) (6,332 ) (4,723 )financed equipmentPayment of deferred ? ? (2,500 ) (1,500 )considerationProceeds from exercise of 4 53 26 66 stock optionsNet cash used in financing (27,467 ) (9,598 ) (83,806 ) (56,097 )activitiesNet effect of exchangerate on cash and cash (331 ) 203 (483 ) (829 )equivalents and restrictedcashNet (decrease) increase incash and cash equivalents (6,353 ) 17,912 (4,279 ) 55,740 and restricted cashCash and cash equivalents and restricted cash:Beginning of period 92,650 150,825 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 $ ? $ ? $ ? $ 7,704 equipment financing

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 Nine Months Ended September 30, September 30, 2019 2020 2019 2020Net 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 Depreciation 11,280 12,824 33,385 38,266 Amortization of other 21,668 17,813 64,137 52,406 intangible assetsStock-based compensation 9,143 9,547 27,513 28,978 Restructuring expenses (193 ) 33 2,005 1,749 Gain on sale of intangible ? ? ? (2,365 )assetsGain on sale of business ? ? ? ? Transaction expenses and ? 461 ? 461 chargesImpairment of goodwill and ? ? 17,892 ? other long-lived assetsShareholder 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 Nine Months Ended September September 30, 30, 2019 2020 2019 2020Cash flows from $ 40,951 $ 54,569 $ 115,680 $ 157,232 operationsLess: Capital expendituresand financed (13,103 ) (12,013 ) (33,128 ) (34,996 )equipmentobligations^(1)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 September30, 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 Nine Months Ended September 30, 30, 2019 2020 2019 2020Consolidated $ 277,193 $ 278,426 $ 836,080 $ 824,607 revenueConsolidated total 4,780 4,965 4,780 4,965 subscribersConsolidatedaverage 4,774 4,921 4,791 4,865 subscribers forthe periodConsolidated ARPS $ 19.35 $ 18.86 $ 19.39 $ 18.83 Web presence $ 174,428 $ 178,064 $ 528,096 $ 528,714 revenueWeb presence 4,289 4,493 4,289 4,493 subscribersWeb presenceaverage 4,283 4,449 4,298 4,395 subscribers forthe periodWeb presence ARPS $ 13.57 $ 13.34 $ 13.65 $ 13.37 Digital marketing $ 102,765 $ 100,362 $ 307,984 $ 295,893 revenueDigital marketing 491 472 491 472 subscribersDigital marketingaverage 491 472 493 470 subscribers forthe periodDigital marketing $ 69.79 $ 70.81 $ 69.40 $ 69.91 ARPS

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 Digital Total presence marketingRevenue $ 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 )Depreciation 9,166 2,114 11,280 Amortization of other intangible 10,115 11,553 21,668 assetsStock-based compensation 5,842 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 assetsShareholder litigation reserve ? ? ? Adjusted EBITDA $ 34,466 $ 46,161 $ 80,627 *

Three Months Ended September 30, 2020 Web Digital Total presence marketingRevenue $ 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) 13,952 15,854 29,806 Income tax (benefit) expense 1,015 572 1,587 Depreciation 10,312 2,512 12,824 Amortization of other intangible 7,653 10,160 17,813 assetsStock-based compensation 6,006 3,541 9,547 Restructuring expenses ? 33 33 Gain on sale of intangible assets ? ? ? Gain on sale of business ? ? ? Transaction expenses and charges ? 461 461 Impairment of goodwill and other ? ? ? long-lived assetsShareholder litigation reserve ? ? ? Adjusted EBITDA $ 38,911 $ 39,834 $ 78,745

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

* Excluding SinglePlatform, which contributed approximately $1.1million in adjusted EBITDA (excluding the impact of corporate cost allocations) in the three months ended September 30, 2019, adjusted EBITDA would have been approximately $79.6million.

Nine Months Ended September 30, 2019 Web Digital Total presence marketingRevenue $ 528,096 $ 307,984 $ 836,080 Gross profit $ 230,485 $ 221,399 $ 451,884 Net (loss) income $ (44,548 ) $ 22,648 $ (21,900 )Interest expense, net^(1) 54,295 55,103 109,398 Income tax expense 1,938 1,102 3,040 Depreciation 26,718 6,667 33,385 Amortization of other intangible 29,893 34,244 64,137 assetsStock-based compensation 17,907 9,606 27,513 Restructuring expenses 785 1,220 2,005 Gain on sale of intangible assets ? ? ? Gain on sale of business ? ? ? Transaction expenses and charges ? ? ? Impairment of goodwill and other 17,892 ? 17,892 long-lived assetsShareholder litigation reserve ? ? ? Adjusted EBITDA $ 104,880 $ 130,590 $ 235,470 *

Nine Months Ended September 30, 2020 Web Digital Total presence marketingRevenue $ 528,714 $ 295,893 $ 824,607 Gross profit $ 261,524 $ 217,092 $ 478,616 Net (loss) income $ (9,277 ) $ 18,305 $ 9,028 Interest expense, net^(1) 44,422 48,972 93,394 Income tax expense 8,551 4,748 13,299 Depreciation 31,099 7,167 38,266 Amortization of other intangible 22,804 29,602 52,406 assetsStock-based compensation 18,916 10,062 28,978 Restructuring expenses 1,032 717 1,749 Gain on sale of intangible assets (2,365 ) ? (2,365 )Gain on sale of business ? ? ? Transaction expenses and charges ? 461 461 Impairment of goodwill and other ? ? ? long-lived assetsShareholder litigation reserve ? ? ? Adjusted EBITDA $ 115,182 $ 120,034 $ 235,216

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

* Excluding SinglePlatform, which contributed approximately $3.7million in adjusted EBITDA (excluding the impact of corporate cost allocations) in the nine months ended September 30, 2019, adjusted EBITDA would have been approximately $231.8 million.