Endurance International Group Reports 2017 Second Quarter Results

  • GAAP revenue of $292.3 million
  • Net loss of $35.4 million
  • Adjusted EBITDA of $82.5 million
  • Cash flow from operations of $48.7 million
  • Free cash flow of $36.8 million 
  • Total subscribers on platform were approximately 5.217 million at June 30, 2017

BURLINGTON, Mass., Aug. 01, 2017 (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 second quarter ended June 30, 2017.

"Our second quarter performance reflected our continued drive toward meeting our 2017 operational and strategic goals," commented Hari Ravichandran, chief executive officer and founder of Endurance International Group.  "We are pleased with our overall results.  Performance in our web presence segment was in-line with expectations while we focused on targeting high-value hosting subscribers.  Constant Contact demonstrated steady revenue growth and margin expansion.  Our year to date performance, along with our outlook for the remainder of the year, have reinforced our belief that our plans for 2017 are setting a strong foundation, and positioning us for profitable growth and strong cash flows in future years."

Second Quarter 2017 Financial Highlights
  • Revenue for the second quarter of 2017 was $292.3 million, an increase of one percent compared to $290.7 million for the second quarter of 2016. Revenue for the second quarter of 2017 includes a contribution of $99.1 million from Constant Contact, as compared to a contribution of $94.7 million for the second quarter of 2016.
  • Net loss for the second quarter of 2017 was $35.4 million compared to net loss of $33.4 million for the second quarter of 2016.
  • Net loss attributable to Endurance International Group Holdings, Inc. for the second quarter of 2017 was $39.1 million, or $(0.29) per diluted share, compared to net loss of $28.0 million, or $(0.21) per diluted share, for the second quarter of 2016.
  • Adjusted EBITDA for the second quarter of 2017 was $82.5 million, an increase of 7 percent compared to $76.9 million for the second quarter of 2016.
  • Cash flow from operations for the second quarter of 2017 was $48.7 million, a decrease of 9 percent compared to $53.8 million for the second quarter of 2016. 
  • Free cash flow, defined as cash flow from operations less capital expenditures and capital lease obligations, for the second quarter of 2017 was $36.8 million compared to $41.6 million for the second quarter of 2016. 

Second Quarter Operating Highlights
  • Total subscribers on platform at June 30, 2017 were approximately 5.217 million, compared to approximately 5.480 million subscribers at June 30, 2016 and 5.304 million subscribers at March 31, 2017.  See "Total Subscribers" below. 
  • Average revenue per subscriber, or ARPS, for the second quarter of 2017 was $18.52, compared to $17.74 for the second quarter of 2016 and $18.43 for the first quarter of 2017.  Excluding the impact of Constant Contact, ARPS for the second quarter of 2017 was $13.62, compared to $13.32 for the second quarter of 2016 and $13.71 for the first quarter of 2017.  See "Average Revenue Per Subscriber" below.

Fiscal 2017 Guidance

The company is updating its guidance for revenue, adjusted EBITDA, and free cash flow.  Expectations for revenue and adjusted EBITDA have increased by approximately $8 million and $6 million, respectively, from the midpoint of prior guidance provided on May 2, 2017.  In addition, as the company accelerates streamlining of its operations and focuses on a narrower set of strategic brands, it expects restructuring expenses to increase by approximately $10 million as compared to those reflected in prior guidance.  As a result, expectations for free cash flow have been reduced by approximately $10 million, reflecting the net impact of higher restructuring costs, lower change in deferred revenue, and lower cash interest expense post refinancing.  The streamlining of the company's cost structure and lower annualized cash interest expense due to the June 2017 refinancing of its term loan is expected to be accretive to free cash flow in 2018.

As of the date of this release, August 1, 2017, for the full year ending December 31, 2017, the company expects:

  2016 Actual as Reported    Previous Guidance (as of May 2, 2017) Updated Guidance    (as of August 1, 2017)*
GAAP revenue    $1.111 billion 4 - 5% increase 5 - 5.5% increase
Adjusted EBITDA   $288 million 12 - 14% increase 14 - 16% increase
Free cash flow $112 million ~35% increase ~25% increase
       

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.

* Percentage increases shown in the "Guidance" column represent percentage increases over 2016 figures shown in the "Actual as Reported" column.

Conference Call and Webcast Information

Endurance International Group's second quarter 2017 financial results teleconference and webcast is scheduled to begin at 8:00 a.m. EDT on Tuesday, August 1, 2017. 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, and impairment of other long-lived assets. 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 second quarter of 2017, these adjustments had a net negative impact of approximately 4,438 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.  We believe ARPS is an indicator of our ability to optimize our mix of products and services and pricing and sell products and services to new and existing subscribers.  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 updated financial guidance for fiscal year 2017, our belief that our year to date results and outlook for the remainder of the year position us  for profitable growth and strong cash flow in future years, our expectations regarding restructuring expenses, changes in deferred revenue and interest expense for the remainder of the year, our belief that our cost streamlining efforts will be accretive to free cash flow in 2018, 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: that we will be unable to successfully enhance the customer product and service experience and improve customer satisfaction and retention through operational and infrastructure improvements; that the senior management transition we are undergoing (including the transition of our chief executive officer) will have an adverse impact on our business; that we will encounter difficulties or delays in our efforts to build brand awareness of our key brands;  that we will be unable to drive revenue growth by increasing ARPS through cross-selling and other product-related initiatives; 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 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 set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the period ended March 31, 2017 filed with the SEC on May 9, 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 vitalize their online web presence, email marketing, mobile business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, iPage, Domain.com, BigRock, SiteBuilder and SinglePlatform, among others. Headquartered in Burlington, Massachusetts, Endurance employs approximately 4,000 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.
 
Endurance International Group Holdings, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share amounts)
 
  December 31, 2016   June 30, 2017
Assets      
Current assets:      
Cash and cash equivalents $ 53,596     $ 81,409  
Restricted cash 3,302     3,401  
Accounts receivable 13,088     11,664  
Prepaid domain name registry fees 55,444     56,710  
Prepaid expenses and other current assets 28,678     28,844  
Total current assets 154,108     182,028  
Property and equipment—net 95,272     94,625  
Goodwill 1,859,909     1,861,608  
Other intangible assets—net 612,057     544,990  
Deferred financing costs 4,932     4,089  
Investments 15,857     15,846  
Prepaid domain name registry fees, net of current portion 10,429     10,789  
Other assets 3,710     2,504  
Total assets $ 2,756,274     $ 2,716,479  
Liabilities, redeemable non-controlling interest and stockholders' equity      
Current liabilities:      
Accounts payable $ 16,074     $ 12,841  
Accrued expenses 67,722     75,088  
Accrued interest 27,246     20,088  
Deferred revenue 355,190     369,825  
Current portion of notes payable 35,700     33,945  
Current portion of capital lease obligations 6,690     4,481  
Deferred consideration—short term 5,273     4,250  
Other current liabilities 2,890     2,947  
Total current liabilities 516,785     523,465  
Long-term deferred revenue 89,200     91,256  
Notes payable—long term, net of original issue discounts of $25,853 and $27,939 and deferred financing costs of $43,342 and $40,622 respectively 1,951,280     1,936,258  
Capital lease obligations—long term 512     1,537  
Deferred tax liability 39,943     44,060  
Deferred consideration—long term 7,444     3,437  
Other liabilities 8,974     9,862  
Total liabilities 2,614,138     2,609,875  
Redeemable non-controlling interest 17,753     25,000  
Commitments and contingencies (Note 17)      
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; 134,793,857 and 137,503,270 shares issued at December 31, 2016 and June 30, 2017, respectively; 134,793,857 and 137,503,270 outstanding at December 31, 2016 and June 30, 2017, respectively   14     14  
Additional paid-in capital 868,228     898,445  
Accumulated other comprehensive loss (3,666 )   (2,144 )
Accumulated deficit (740,193 )   (814,711 )
Total stockholders' equity 124,383     81,604  
Total liabilities, redeemable non-controlling interest and stockholders' equity $ 2,756,274     $ 2,716,479  
               

 
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 June 30,    Six Months Ended June 30, 
  2016   2017   2016   2017
Revenue $ 290,713     $ 292,258     $ 527,826     $ 587,395  
Cost of revenue 153,077     146,583     289,553     295,332  
Gross profit 137,636     145,675     238,273     292,063  
Operating expense:              
Sales and marketing 80,309     72,106     159,603     144,878  
Engineering and development 27,687     20,149     43,942     40,511  
General and administrative 34,830     40,580     75,109     79,660  
Transactions expenses 978     193     32,098     773  
Total operating expense 143,804     133,028     310,752     265,822  
Income (loss) from operations (6,168 )   12,647     (72,479 )   26,241  
Other income (expense):              
Other income         11,410      
Interest income 142     185     276     303  
Interest expense (40,994 )   (45,658 )   (71,365 )   (85,174 )
Total other expense—net (40,852 )   (45,473 )   (59,679 )   (84,871 )
Loss before income taxes and equity earnings of unconsolidated entities (47,020 )   (32,826 )   (132,158 )   (58,630 )
Income tax expense (benefit) (13,931 )   2,628     (113,833 )   8,402  
Loss before equity earnings of unconsolidated entities (33,089 )   (35,454 )   (18,325 )   (67,032 )
Equity loss (income) of unconsolidated entities, net of tax 341     (39 )   1,024     (39 )
Net loss $ (33,430 )   $ (35,415 )   $ (19,349 )   $ (66,993 )
Net (loss) income attributable to non-controlling interest (5,390 )   51     (13,120 )   277  
Excess accretion of non-controlling interest     3,663         7,247  
Total net (loss) income attributable to non-controlling interest (5,390 )   3,714     (13,120 )   7,524  
Net loss attributable to Endurance International Group Holdings, Inc. $ (28,040 )   $ (39,129 )   $ (6,229 )   $ (74,517 )
Comprehensive income (loss):              
Foreign currency translation adjustments 540     1,228     882     1,914  
Unrealized loss on cash flow hedge, net of taxes of $(218) and $(192), and $(824) and $(230) for the three and six months ended June 30, 2016 and 2017, respectively   (427 )   (176 )   (1,938 )   (392 )
Total comprehensive loss $ (27,927 )   $ (38,077 )   $ (7,285 )   $ (72,995 )
Basic net loss per share attributable to Endurance International Group Holdings Inc. $ (0.21 )   $ (0.29 )   $ (0.05 )   $ (0.55 )
Diluted net loss per share attributable to Endurance International Group Holdings Inc. $ (0.21 )   $ (0.29 )   $ (0.05 )   $ (0.55 )
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.:              
Basic 132,566,622     137,295,120     132,736,382     136,124,347  
Diluted 132,566,622     137,295,120     132,736,382     136,124,347  
                       

 
Endurance International Group Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
   Three Months Ended June 30,     Six Months Ended June 30, 
  2016   2017   2016   2017
Cash flows from operating activities:              
Net loss $ (33,430 )   $ (35,415 )   $ (19,349 )   $ (66,993 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation of property and equipment 16,760     14,051     29,932     27,162  
Amortization of other intangible assets 37,823     34,940     67,697     69,207  
Impairment of long lived assets 6,848         8,285      
Amortization of deferred financing costs 1,651     1,786     2,562     3,530  
Amortization of net present value of deferred consideration 799     187     1,582     377  
Dividend from minority interest 50     50     50     50  
Amortization of original issue discounts 823     886     1,272     1,732  
Stock-based compensation 15,024     16,245     33,412     29,169  
Deferred tax (benefit) expense (14,259 )   906     (117,462 )   4,346  
(Gain) loss on sale of assets (224 )   97     (225 )   (128 )
(Gain) loss from unconsolidated entities 341     (39 )   (10,386 )   (39 )
(Gain) loss from change in deferred consideration         21      
Financing costs expensed     5,487         5,487  
Loss on early extinguishment of debt     992         992  
Changes in operating assets and liabilities, net of acquisitions:              
  Accounts receivable (598 )   (1,034 )   1,546     1,359  
  Prepaid expenses and other current assets 787     4,374     (14,886 )   (1,343 )
  Accounts payable and accrued expenses 9,544     4,463     26,517     (9,004 )
  Deferred revenue 11,904     771     55,047     16,518  
Net cash provided by operating activities 53,843     48,747     65,615     82,422  
Cash flows from investing activities:              
Businesses acquired in purchase transactions, net of cash acquired (18,180 )       (899,889 )    
Cash paid for minority investment (5,000 )       (5,600 )    
Purchases of property and equipment (10,821 )   (10,037 )   (20,961 )   (19,295 )
Proceeds from sale of assets 252     36     252     287  
Purchases of intangible assets (27 )   (1,647 )   (27 )   (1,680 )
(Withdrawals) deposits of principal balances in restricted cash accounts (31 )   244     (768 )   (100 )
Net cash used in investing activities (33,807 )   (11,404 )   (926,993 )   (20,788 )
Cash flows from financing activities:              
Proceeds from issuance of term loan and notes, net of original issue discounts     1,693,007     1,056,178     1,693,007  
Repayments of term loans (24,925 )   (1,705,736 )   (33,850 )   (1,714,661 )
Proceeds from borrowing of revolver         16,000      
Repayment of revolver         (83,000 )    
Payment of financing costs (122 )   (5,968 )   (51,727 )   (6,060 )
Payment of deferred consideration     (4,590 )   (707 )   (5,408 )
Principal payments on capital lease obligations (1,457 )   (1,871 )   (2,896 )   (3,908 )
Capital investment from minority partner 1,000         1,000      
Proceeds from exercise of stock options 735     504     1,328     1,132  
Net cash provided by (used in) financing activities (24,769 )   (24,654 )   902,326     (35,898 )
Net effect of exchange rate on cash and cash equivalents 1,048     (250 )   1,614     2,077  
Net increase in cash and cash equivalents (3,685 )   12,439     42,562     27,813  
Cash and cash equivalents:              
Beginning of period 79,277     68,970     33,030     53,596  
End of period $ 75,592     $ 81,409     $ 75,592     $ 81,409  
Supplemental cash flow information:              
Interest paid $ 27,512     $ 33,576     $ 44,171     $ 80,122  
Income taxes paid $ 1,480     $ 1,507     $ 2,448     $ 2,459  
                               

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 June 30,     Six Months Ended June 30, 
  2016   2017   2016   2017
Net income (loss) $  (33,430 )   $  (35,415 )   $  (19,349 )   $ (66,993 )
Interest expense, net (1) 40,852     45,473     71,089     84,871  
Income tax expense (benefit) (13,931 )   2,628     (113,833 )   8,402  
Depreciation 16,760     14,051     29,932     27,162  
Amortization of other intangible assets 37,823     34,940     67,697     69,207  
Stock-based compensation 15,024     16,245     33,412     29,169  
Restructuring expenses 5,663     4,468     17,265     10,096  
Transaction expenses and charges 978     193     32,098     773  
Loss (gain) of unconsolidated entities (2)   341     (39 )   (10,386 )   (39 )
Impairment of other long-lived assets 6,848         8,285      
Adjusted EBITDA $ 76,928     $ 82,544     $ 116,210     $  162,648  
                               

(1) Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income. For the three and six months ended June 30, 2017, it also includes $6.5 million of deferred financing costs and original issuance discounts immediately expensed upon refinancing of our term loan in June 2017.

(2) The loss (gain) of unconsolidated entities is reported on a net basis for the three and six months ended June 30, 2016. The six months ended June 30, 2016 includes a gain of $11.4 million on our investment in WZ UK Ltd.  This gain was generated on January 6, 2016, when we increased our ownership stake in WZ UK Ltd. from 49% to 57.5%, which required a revaluation of our existing investment to its implied fair value.  This $11.4 million gain was partially offset by our proportionate shares of net losses from unconsolidated entities of $1.0 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):
   Three Months Ended June 30,     Six Months Ended June 30, 
  2016   2017   2016   2017
Cash flow from operations $ 53,843     $ 48,747     $ 65,615     $ 82,422  
Less:              
Capital expenditures and capital lease obligations (1)   (12,278 )   (11,908 )   (23,857 )   (23,203 )
Free cash flow $ 41,565     $ 36,839     $ 41,758     $ 59,219  
                               

(1) Capital expenditures during the three and six months ended June 30, 2016 includes $1.5 million and $2.9 million, respectively, of principal payments under a three year capital lease for software. Capital expenditures during the three and six months ended June 30, 2017 includes $1.9 million and $3.9 million, respectively, of principal payments under a three year capital lease for software. The remaining balance on the capital lease is $6.0 million as of June 30, 2017.

Average Revenue Per Subscriber - Calculation and Segment Detail

We present our financial results in two segments.  Our web presence segment is our historical business before the acquisition of Constant Contact, and includes primarily our web hosting products, domains, website builders and related add-on products.  Our email marketing segment consists of the Constant Contact business, including email marketing, event management, survey tools and the SinglePlatform digital storefront service.

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 June 30,     Six Months Ended June 30, 
    2016   2017   2016   2017
Consolidated revenue   $ 290,713     $ 292,258     $ 527,826     $ 587,395  
Consolidated total subscribers   5,480     5,217     5,480     5,217  
Consolidated average subscribers for the period   5,463     5,261     5,274     5,294  
Consolidated average revenue per subscriber (ARPS)   $ 17.74     $ 18.52     $ 16.68     $ 18.49  
                 
Web presence revenue   196,041     193,172     394,089     390,520  
Web presence subscribers   4,929     4,687     4,929     4,687  
Web presence average subscribers for the period   4,906     4,727     4,838     4,757  
Web presence average revenue per subscriber (ARPS)   $ 13.32     $ 13.62     $ 13.58     $ 13.68  
                 
Email marketing revenue   94,672     99,086     133,737     196,875  
Email marketing subscribers   551     530     551     530  
Email marketing average subscribers for the period   557     534     436     537  
Email marketing average revenue per subscriber (ARPS)     $ 56.68     $ 61.88     $ 51.15     $ 61.10  
                                 
                                 

The following table presents revenue, gross profit, and a reconciliation by segment of net income (loss) calculated in accordance with GAAP to adjusted EBITDA (all data in thousands):
       
  Three Months Ended June 30, 2016   Three Months Ended June 30, 2017
  Webpresence   Emailmarketing   Total   Webpresence   Emailmarketing   Total
Revenue $  196,041     $   94,672     $  290,713     $  193,172     $   99,086     $  292,258  
Gross profit 86,666     50,970     137,636     82,552     63,123     145,675  
                       
Net income (loss) (17,461 )   (15,969 )   (33,430 )   $ (33,139 )   $ (2,276 )   $ (35,415 )
Interest expense, net (1) 18,077     22,775     40,852     20,294     25,179     45,473  
Income tax expense (benefit) (4,341 )   (9,590 )   (13,931 )   3,995     (1,367 )   2,628  
Depreciation 9,098     7,662     16,760     10,525     3,526     14,051  
Amortization of other intangible assets 19,768     18,055     37,823     16,375     18,565     34,940  
Stock-based compensation 10,429     4,595     15,024     14,345     1,900     16,245  
Restructuring expenses 789     4,874     5,663     3,699     769     4,468  
Transaction expenses and charges 757     221     978         193     193  
(Gain) loss of unconsolidated entities (2)   341         341     (39 )       (39 )
Impairment of other long-lived assets 6,848         6,848              
Adjusted EBITDA $ 44,305     $ 32,623     $ 76,928     $ 36,055     $ 46,489     $ 82,544  

       
  Six Months Ended June 30, 2016   Six Months Ended June 30, 2017
  Webpresence   Emailmarketing   Total   Webpresence   Emailmarketing   Total
Revenue $  394,089     $  133,737     $  527,826     $  390,522     $  196,875     $  587,397  
Gross profit 176,551     61,722     238,273     169,168     122,895     292,063  
                       
Net income (loss) $ 22,673     $ (42,022 )   $ (19,349 )   $ (56,766 )   $ (10,227 )   $ (66,993 )
Interest expense, net (1) 35,093     35,996     71,089     37,173     47,698     84,871  
Income tax expense (benefit) (88,598 )   (25,235 )   (113,833 )   14,544     (6,142 )   8,402  
Depreciation 18,075     11,857     29,932     19,763     7,399     27,162  
Amortization of other intangible assets 39,523     28,174     67,697     32,280     36,927     69,207  
Stock-based compensation 25,075     8,337     33,412     25,445     3,724     29,169  
Restructuring expenses 960     16,305     17,265     6,036     4,060     10,096  
Transaction expenses and charges 31,114     984     32,098         773     773  
(Gain) loss of unconsolidated entities (2)   (10,386 )       (10,386 )   (39 )       (39 )
Impairment of other long-lived assets 8,285         8,285              
Adjusted EBITDA $ 81,814     $ 34,396     $ 116,210     $ 78,436     $ 84,212     $ 162,648  
                                               

(1)  Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income. For the three and six months ended June 30, 2017, it also includes $6.5 million of deferred financing costs and original issuance discounts immediately expensed upon refinancing of our term loan in June 2017.

(2)  The (gain) loss of unconsolidated entities is reported on a net basis for the three and six months ended June 30, 2016. The six months ended June 30, 2016 includes a gain of $11.4 million on our investment in WZ UK Ltd.  This gain was generated on January 6, 2016, when we increased our ownership stake in WZ UK Ltd. from 49% to 57.5%, which required a revaluation of our existing investment to its implied fair value.  This $11.4 million gain was partially offset by our proportionate shares of net losses from unconsolidated entities of $1.0 million.

GAAP to Non-GAAP Reconciliation of Fiscal Year 2017 Guidance (as of August 1, 2017) - Adjusted EBITDA

The following table reflects the reconciliation of fiscal year 2017 estimated net loss calculated in accordance with GAAP to fiscal year 2017 guidance for adjusted EBITDA at the midpoint of the guidance range (i.e. assuming a 15% increase over 2016 adjusted EBITDA as reported). All figures shown are approximate.
   
($ in millions) Twelve Months EndingDecember 31, 2017
Estimated net loss $ (103 )        
Estimated interest expense (net)   156          
Estimated income tax expense (benefit)   10          
Estimated depreciation   58          
Estimated amortization of acquired intangible assets     137          
Estimated stock-based compensation   59          
Estimated restructuring expenses   15          
Estimated transaction expenses and charges   -          
Estimated (gain) loss of unconsolidated entities   -          
Estimated impairment of other long-lived assets   -          
Adjusted EBITDA guidance         $ 332  
               
               

GAAP to Non-GAAP Reconciliation of Fiscal Year 2017 Guidance (as of August 1, 2017) - Free Cash Flow

The following table reflects the reconciliation of fiscal year 2017 estimated cash flow from operations calculated in accordance with GAAP to fiscal year 2017 guidance for free cash flow. All figures shown are approximate.
   
($ in millions) Twelve Months EndingDecember 31, 2017
Estimated cash flow from operations $ 190          
Estimated capital expenditures and capital lease obligations     (50 )        
Free cash flow guidance         $ 140  

 
Investor Contact:Angela WhiteEndurance International Group(781) 852-3450ir@endurance.comPress Contact:Kristen AndrewsEndurance International Group(781) 482-7038press@endurance.com

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