EX-99.1 2 d169027dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Unless otherwise indicated or the context otherwise requires, in this communication, we use the terms “we,” “us,” “our,” “Endurance” and the “Company” to refer to Endurance International Group Holdings, Inc. and its subsidiaries and the term “Constant Contact” to refer to Constant Contact, Inc. and its wholly owned subsidiaries. You should not assume that the information set forth below is accurate as of any date other than May 13, 2016.

Cautionary Statement Concerning Forward-Looking Information

This communication includes “forward-looking statements” that involve risks and uncertainties within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “expect”, “to be” and similar expressions or variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These statements are based on the beliefs and assumptions of our management based on information currently available to management. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or the timing of certain events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make as a result of a number of important factors. These important factors include the factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, or our Form 10-K, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. Furthermore, such forward-looking statements speak only as of the date of this communication.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, and we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of any new information, events, circumstances or otherwise.

WZ UK Ltd. Acquisition

During the second quarter of 2016, we expect to exercise an option to increase our stake in WZ UK Ltd., a provider of technology and sales marketing services associated with web builder solutions, from 57.5% to 77.5%, in exchange for a payment of approximately $15 million to the other shareholders of WZ UK Ltd. After a specified performance milestone is met, we have an option to purchase, and the other shareholders of WZ UK Ltd. have an option to sell to us within three years, the remaining shares of WZ UK Ltd. at a per-share price to be determined based on a multiple of revenue.

Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of Endurance and Constant Contact, and has been prepared to give effect to the acquisition of Constant Contact by Endurance (the “Acquisition”) and entry into a $735 million first lien incremental term loan facility (the “Incremental First Lien Term Loan Facility”), a $165 million revolving credit facility (the “Revolving Credit Facility”) (which replaced our existing $125 million senior secured revolving credit facility), and the issuance of $350 million aggregate principal amount of 10.875% Senior Notes due 2024 (the “notes” and together with the Acquisition, the Incremental First Lien Term Loan Facility and the Revolving Credit Facility, the “Transactions”). The unaudited pro forma condensed combined statements of operations data for the year ended December 31, 2015 and the three months ended March 31, 2015 and 2016 give effect to the Transactions as if they had occurred as of January 1, 2015. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) with respect to statement of operations information, expected to have a continuing impact on the combined results of operations.

The unaudited pro forma condensed combined financial information is unaudited and is presented for illustrative purposes only. This financial information (including the pro forma adjustments) is preliminary and based upon available information and various adjustments and assumptions set forth in the accompanying notes, and is not necessarily an indication of the consolidated financial position or results of operations of Endurance that would have been achieved had the Transactions been completed as of the dates indicated or that may be achieved in the future.

 

1


The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Endurance. These accounting policies are similar in most material respects to those of Constant Contact before the consummation of the Acquisition, except for the accounting for amortization of intangible assets. The unaudited pro forma condensed combined financial information reflects the amortization of intangible assets as a cost of revenue, which is consistent with our historical accounting policy for this item. The unaudited pro forma condensed combined statements of operations do not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that may or may not result from the Acquisition.

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions, as well as the audited consolidated financial statements and accompanying notes of Endurance for the year ended December 31, 2015 from our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016; the audited consolidated financial statements and accompanying notes of Constant Contact for the year ended December 31, 2015 from our Current Report on Form 8-K/A filed with the SEC on March 31, 2016 (as amended by the 8-K/A filed with the SEC on May 13, 2016); the unaudited consolidated financial statements and accompanying notes of Endurance for the three months ended March 31, 2015 and 2016 from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 9, 2016 and the unaudited condensed consolidated financial statements and accompanying notes of Constant Contact for the three months ended March 31, 2015 from Constant Contact’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the SEC on May 6, 2015.

Endurance International Group, Inc. and Constant Contact, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Three Months Ended March 31, 2016

(in thousands)

 

     Historical              
     Endurance     Constant
Contact*
    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 237,113      $ 41,088      $ (395 )(C)    $ 277,806   

Cost of revenue

     136,476        11,639        7,865 (B)(C)      155,980   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     100,637        29,449        (8,260     121,826   

Operating expense:

        

Sales and marketing

     79,294        16,433        (395 )(B)(C)      95,332   

Engineering and development

     16,255        7,026        (680 )(D)      22,601   

General and administrative

     40,279        2,757        —          43,036   

Transaction costs

     31,120        17,281        (48,401 )(E)      —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     166,948        43,497        (49,476     160,969   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (66,311     (14,048     41,216        (39,143
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     134        —          —          134   

Interest expense

     (30,371     —          (11,355 )(A)      (41,726

Other income (expense), net

     11,410        (13     —          11,397   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (18,827     (13     (11,355     (30,195
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (85,138     (14,061     29,861        (69,338

Income tax benefit

     (99,902     (6,023     8,062 (G)      (97,863
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity earnings of unconsolidated entities

     14,764        (8,038     21,799        28,525   

Equity loss of unconsolidated entities, net of tax

     683        —          —          683   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     14,081        (8,038     21,799        27,842   

Net loss attributable to non-controlling interest

     (7,730     —          —          (7,730
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 21,811      $ (8,038   $ 21,799      $ 35,572   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Historical consolidated financial information of Constant Contact presented for the period from January 1, 2016 through the acquisition date, February 9, 2016.

 

2


Endurance International Group, Inc. and Constant Contact, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Three Months Ended March 31, 2015

(in thousands)

 

     Historical              
     Endurance     Constant
Contact
    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 177,318      $ 90,417      $ (781 )(C)    $ 266,954   

Cost of revenue

     100,974        24,431        17,799 (B)(C)      143,204   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     76,344        65,986        (18,580     123,750   

Operating expenses:

        

Sales and marketing

     35,044        36,068        (854 )(B)(C)      70,258   

Engineering and development

     5,371        13,825        (1,546 )(D)      17,650   

General and administrative

     18,730        11,793        —          30,523   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     59,145        61,686        (2,400     118,431   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     17,199        4,300        (16,180     5,319   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     92        53        (53 )(F)      92   

Interest expense

     (14,321     —          (26,579 )(A)      (40,900

Other expense, net

     —          (110     —          (110
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (14,229     (57     (26,632     (40,918
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and equity earnings of unconsolidated entities

     2,970        4,243        (42,812     (35,599

Income tax expense (benefit)

     978        693        (13,063 )(G)      (11,392
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity earnings of unconsolidated entities

     1,992        3,550        (29,749     (24,207

Equity loss of unconsolidated entities, net of tax

     1,108        —          —          1,108   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     884        3,550        (29,749     (25,315

Net loss attributable to non-controlling interest

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 884      $ 3,550      $ (29,749   $ (25,315
  

 

 

   

 

 

   

 

 

   

 

 

 

 

3


Notes to Unaudited Condensed Combined Pro Forma Financial Information

Note 1—Basis of Presentation

The unaudited pro forma condensed combined statements of operations data for the three months ended March 31, 2015 and 2016 give effect to the Transactions as if they had occurred as of January 1, 2015. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results of operations.

We have accounted for the Acquisition using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

The pro forma adjustments described below were developed based on Endurance’s assumptions and estimates, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Constant Contact based on preliminary estimates of fair value. The final purchase price allocation may differ from what is currently reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized. Additionally, the Acquisition and related transaction costs were funded primarily by new debt consisting of the 10.875% Senior Notes due 2024 and borrowings under the Incremental First Lien Term Loan Facility, and to a lesser extent, cash, cash equivalents and short-term marketable securities of Endurance and Constant Contact.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined company would have been had the Acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

The unaudited pro forma condensed combined financial information does not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that may or may not result from the Acquisition.

As part of the definitive agreement pursuant to which we agreed to acquire all of the outstanding shares of common stock of Constant Contact (the “Merger Agreement”), we accelerated all or a portion of the vesting of certain Constant Contact equity awards. This acceleration resulted in a compensation charge of approximately $16.8 million recorded in the statement of operations of Endurance immediately following the Acquisition. Additionally, pursuant to and in accordance with the terms and conditions of the Merger Agreement, Endurance assumed certain unvested Constant Contact equity awards and converted them into equity awards in in respect of common stock of Endurance. The value of these converted awards is estimated to be approximately $22.3 million. Approximately $5.4 million of this value has been attributed to the pre-Acquisition period, which has been accounted for as additional consideration to acquire Constant Contact. The balance of $16.9 million has been attributed to the post-Acquisition period and is being recorded as compensation expense over the future service period of each individual holding such an award. Included in these converted awards are awards valued at approximately $3.2 million which provide for full acceleration of vesting if the holder leaves Endurance other than for cause at any time before April 7, 2017. The unaudited condensed combined statement of operations do not reflect the balance of $16.9 million attributed to the post-Acquisition period, which is future compensation expense as it is not expected to differ materially from the historical rates of equity compensation expense included in the historical condensed consolidated statements of operations of Constant Contact.

Endurance historically has recorded all amortization expense related to acquired intangible assets as a cost of revenue, which differs from the historical treatment of these expenses by Constant Contact, which historically recorded amortization expense as either cost of revenue or sales and marketing expense. The unaudited combined condensed financial information reflects all amortization expense related to intangible assets as a cost of revenue.

Note 2—Preliminary Allocation of Merger Consideration

Pursuant to the Merger Agreement, we paid $32.00 per share, or $1,087.1 million, in cash, to acquire all outstanding equity interests of Constant Contact. In addition, we assumed certain Constant Contact unvested equity awards and converted them to equity awards in Endurance common stock. Approximately $5.4 million of the value of these awards are expected to be attributable to pre-Acquisition service, and that portion was treated as additional purchase consideration to acquire Constant Contact. As a result, the total purchase consideration paid to acquire Constant Contact was $1,092.6 million. Included in the purchase consideration is approximately $16.8 million related to the acceleration of vesting of certain Constant Contact equity awards which is being expensed by Endurance immediately following the closing of the Acquisition. The remaining purchase consideration of $1,075.8 million was allocated to the acquired assets and liabilities.

 

4


The following table summarizes the preliminary allocation of the assets acquired and liabilities assumed based on their fair values on the assumed acquisition date:

 

Preliminary purchase price allocation

      
(in thousands)       

Working capital

   $ (6,158

Property, plant and equipment

     40,699   

Trademarks

     52,000   

Customer relationships

     263,000   

Developed technology

     83,000   

Goodwill

     601,091   

Deferred taxes

     (122,859

Deferred revenue

     (25,170
  

 

 

 

Total consideration, net of cash acquired

     885,603   

Cash acquired

     190,170   
  

 

 

 

Total purchase consideration

   $ 1,075,773   
  

 

 

 

The purchase price is preliminary and the purchase price will be final when the Company has completed the valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.

Note 3—Sources and Uses, and New Debt

The Acquisition was financed primarily by new debt consisting of the notes offered hereby and borrowings under the Incremental First Lien Term Loan Facility, and to a lesser extent, cash, cash equivalents and short-term marketable securities acquired from Constant Contact. The tables below provide an estimate of the sources and uses as of the assumed closing date:

 

Sources of proceeds

      
(in thousands)       

Use of cash from Endurance and Constant Contact

   $ 187,692   

Endurance stock awards issued at closing

     5,394   

Incremental First Lien Term Loan Facility, net of original issue discounts

     712,950   

10.875% Senior Notes due 2024, net of original issue discounts

     343,228   
  

 

 

 
   $ 1,249,264   
  

 

 

 

Use of proceeds

      
(in thousands)       

Acquisition of Constant Contact

   $ 1,075,773   

Repayment of outstanding advances on existing revolving credit facility

     67,000   

Transaction costs of Acquisition

     37,327   

Cash out of Constant Contact stock awards accelerated at closing

     16,765   

Deferred financing costs of new debt

     52,399   
  

 

 

 
   $ 1,249,264   
  

 

 

 

The Incremental First Lien Term Loan Facility requires us to repay approximately $3.7 million of principal per quarter, or $14.7 million per year.

 

5


Note 4—Pro Forma Adjustments

 

(A) Adjustments to reflect the new debt, including interest rates as noted below:

 

     Amount      Rate     Interest  
For the three months ended March 31, 2016:                    

Interest Expense on new debt:

                   
(in thousands)                    

Incremental First Lien Term Loan Facility

     735,000         6.00   $ 4,846   

10.875% Senior Notes due 2024

     350,000         10.88     4,183   

Revolving Credit Facility—unused commitment fee

     165,000         0.50     91   

Increased interest on existing debt

     1,076,375         1.48     1,669   

Interest savings on refinanced revolver balance

          (692

Amortization of deferred financing costs and original issue discount

          1,258   
       

 

 

 
        $ 11,355   
       

 

 

 
     Amount      Rate     Interest  
For the three months ended March 31, 2015:                    

Interest Expense on new debt:

                   
(in thousands)                    

Incremental First Lien Term Loan Facility

     735,000         6.00   $ 11,025   

10.875% Senior Notes due 2024

     350,000         10.88     9,516   

Revolving Credit Facility—unused commitment fee

     165,000         0.50     206   

Increased interest on existing debt

     1,031,625         1.48     3,817   

Interest savings on refinanced revolver balance

          (847

Amortization of deferred financing costs and original issue discount

          2,862   
       

 

 

 
        $ 26,579   
       

 

 

 

Our existing debt agreement provides for increased interest rates when certain new debt arrangements exceed a specified interest rate. As a result of this provision, we incurred an increase of approximately 1.48% to the interest rates on our existing debt.

Deferred financing fees and original issue discounts are amortized to interest expense over the life of each respective instrument. We incurred a total of $52.4 million in deferred financing costs and $28.8 million of original issue discounts. Deferred financing fees are primarily comprised of underwriting fees.

 

(B) Adjustments to reflect increases in amortization of intangible assets as noted below (amounts in thousands, except life):

 

     Cost      Life in
Years
     First Year
Amortization
 
For the three months ended March 31, 2016:                     

Trademarks

   $ 52,000         10       $ 868   

Customer relationships

     263,000         15         5,824   

Developed technology

     83,000         7         1,312   

Eliminate historical amortization of Constant Contact—cost of revenue

           (82
        

 

 

 

Subtotal—adjustment to cost of sales

           7,922   

Eliminate historical amortization of Constant Contact—sales and marketing

           (57
        

 

 

 

Total adjustment to amortization

         $ 7,865   
        

 

 

 
     Cost      Life in
Years
     First Year
Amortization
 
For the three months ended March 31, 2015:                     

Trademarks

   $ 52,000         10       $ 1,976   

Customer relationships

     263,000         15         13,250   

Developed technology

     83,000         7         2,984   

Eliminate historical amortization of Constant Contact—cost of revenue

           (280
        

 

 

 

Subtotal—adjustment to cost of sales

           17,930   

Eliminate historical amortization of Constant Contact—sales and marketing

           (204
        

 

 

 

Total adjustment to amortization

         $ 17,726   
        

 

 

 

 

6


(C) Elimination of intercompany transactions from the statement of operations (in thousands):

 

Three months ended March 31, 2016:       

Revenue

   $ (395

Cost of revenue

     57   

Sales and marketing

     338   
  

 

 

 

Net impact

   $ —     
  

 

 

 
Three months ended March 31, 2015:       

Revenue

   $ (781

Cost of revenue

     131   

Sales and marketing

     650   
  

 

 

 

Net impact

   $ —     
  

 

 

 

 

(D) Reduction in depreciation expense due to revaluation of property, plant and equipment.

 

(E) Elimination of transaction expenses (in thousands):

 

Three months ended March 31, 2016       

Endurance

   $ 31,120   

Constant Contact

     17,281   
  

 

 

 
   $ 48,401   
  

 

 

 

 

(F) Reduction of investment income due to utilization of Constant Contact excess cash to fund a portion of the acquisition costs.

 

(G) The pro forma tax adjustments reflect the benefits from income tax at the weighted average estimated statutory income tax rates applicable to the jurisdictions in which the pro forma adjustments are expected to be recorded.

Pro Forma Non-GAAP Financial Measures

Some of these pro forma figures do not represent “pro forma” amounts determined in accordance with the SEC’s rules and regulations, including Article 11 of Regulation S-X, and should not be taken to represent how Endurance would have performed on a historical basis had Constant Contact’s operations been included in the period presented, or how Endurance will perform in any future period. These non-GAAP financial measures, as well as the other information in these excerpts should be read in conjuction with our and Constant Contact’s financial statements appearing elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2015 and our Quarterly Report on Form 10-Q for the period ended March 31, 2016.

 

     Year Ended
December 31,
     Three Months Ended
March 31,
     Twelve Months
Ended
March 31,
2016
 
     2015      2015      2016     
Financial and Pro Forma Metrics:                            
(in thousands)                            
(unaudited)                            

Pro forma revenue(1)

   $ 1,105,317       $ 266,954       $ 277,806       $ 1,116,169   

Pro forma net income (loss)(1)

   $ (107,800    $ (25,315    $ 27,842       $ (54,643

Pro forma adjusted EBITDA(2)

   $ 342,022       $ 84,619       $ 94,679       $ 352,082   

Adjusted EBITDA for Ace Data Center(3)

   $ 5,475       $ 1,825       $ —         $ 3,650   

Estimated annual run rate synergies(4)

   $ 55,000       $ 13,750       $ 5,541       $ 46,791   
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition pro forma adjusted EBITDA(5)

   $ 402,497       $ 100,194       $ 100,220       $ 402,523   

Pro forma capital expenditures

   $ (63,619    $ (13,429    $ (12,722    $ (62,912
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition pro forma adjusted EBITDA less capital expenditures

   $ 338,878       $ 86,765       $ 87,498       $ 339,611   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7


 

(1) See “Unaudited Pro Forma Condensed Combined Financial Information.”
(2) We define pro forma adjusted EBITDA as pro forma net income (loss) plus (i) changes in pro forma deferred revenue, pro forma depreciation, pro forma amortization, pro forma stock-based compensation expense, pro forma loss of unconsolidated entities, pro forma net loss on sale of assets, pro forma impairment of other intangibles, pro forma expenses related to integration of acquisitions and restructurings, pro forma transaction expenses and charges, certain pro forma legal advisory expenses, pro forma interest expense and pro forma income tax expense, less (ii) pro forma earnings and gains related to unconsolidated entities, pro forma net gain on sale of assets and the pro forma impact of purchase accounting related to reduced fair value of deferred domain registration costs. See “Unaudited Pro Forma Condensed Combined Financial Information.” The following table reflects a reconciliation of pro forma adjusted EBITDA to net income (loss) in accordance with GAAP:

Year Ended December 31, 2015

(in thousands)

(unaudited)

 

     Historical      Pro Forma
Adjustments
     Pro Forma
Combined
 
     Endurance      Constant Contact        

Pro forma EBITDA

           

Net income (loss)

   $ (25,770    $ 19,190       $ (101,220    $ (107,800

Interest expense, net (including impact of amortization of deferred financing costs)

     58,414         (317      105,898         163,995   

Income tax expense (benefit)

     11,342         7,998         (63,180      (43,840

Depreciation

     34,010         23,313         (6,184      51,139   

Amortization

     91,057         1,583         71,256         163,896   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma EBITDA

   $ 169,053       $ 51,767       $ 6,570       $ 227,390   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma adjusted EBITDA

           

EBITDA

   $ 169,053       $ 51,767       $ 6,570       $ 227,390   

Stock-based compensation

     29,925         18,040         —           47,965   

Loss (gain) on sale of assets

     (155      67         —           (88

Loss of unconsolidated entities

     9,200         —           —           9,200   

Changes in deferred revenue

     34,241         2,149         (14      36,376   

Impact of reduced fair value of deferred domain registration costs

     (2,005      —           —           (2,005

Transaction expenses and charges

     9,582         2,561         (6,570      5,573   

Legal advisory expenses

     1,349         —           —           1,349   

Integration and restructuring expenses

     16,262         —           —           16,262   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma adjusted EBITDA

   $ 267,452       $ 74,584       $ (14    $ 342,022   
  

 

 

    

 

 

    

 

 

    

 

 

 

Three and Twelve Months Ended March 31, 2016

(in thousands)

(unaudited)

 

     Three Months Ended March 31, 2016     Twelve Months
Ended
March 31,
2016
 
     Historical                    
     Endurance     Constant
Contact(a)
    Pro Forma
Adjustments
    Pro Forma
Combined
    Pro Forma
Combined
 

Pro forma EBITDA

          

Net income (loss)

   $ 14,081      $ (8,038   $ 21,799      $ 27,842      $ (54,643

Interest expense, net (including impact of amortization of deferred financing costs and original issue discounts)

     30,237        —          11,355        41,592        164,779   

Income tax expense (benefit)

     (99,902     (6,023     8,062        (97,863     (130,311

Depreciation

     13,172        2,721        (680     15,213        54,463   

Amortization

     29,874        138        7,865        37,877        162,265   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma EBITDA

   $ (12,538   $ (11,202   $ 48,401      $ 24,661      $ 196,553   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma adjusted EBITDA

          

EBITDA

   $ (12,538   $ (11,202   $ 48,401      $ 24,661      $ 196,553   

Stock-based compensation

     18,388        1,809        —          20,197        59,887   

Gain on sale of assets

     (1     (1,184     —          (1,185     (1,423

Gain of unconsolidated entities

     (10,727     —          —          (10,727     (2,635

Changes in deferred revenue

     43,143        611        —          43,754        62,805   

Impact of reduced fair value of deferred domain registration costs

     (291     —          —          (291     (1,618

Impairment of IPR&D

     1,437        —          —          1,437        1,437   

Transaction expenses and charges

     31,120        17,281        (48,401     —          4,050   

Legal advisory expenses

     1,540        256        —          1,796        3,145   

Integration and restructuring expenses

     15,037        —          —          15,037        29,881   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma adjusted EBITDA

   $ 87,108      $ 7,571      $ —        $ 94,679      $ 352,082   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Historical consolidated financial information of Constant Contact presented for the period from January 1, 2016 through the acquisition date, February 9, 2016.

 

8


Three Months Ended March 31, 2015

(in thousands)

(unaudited)

 

     Historical      Pro Forma
Adjustments
     Pro Forma
Combined
 
     Endurance      Constant Contact        

Pro forma EBITDA

           

Net income (loss)

   $ 884       $ 3,550       $ (29,749    $ (25,315

Interest expense, net (excluding impact of amortization of deferred financing costs)

     14,229         (53      26,632         40,808   

Income tax expense (benefit)

     978         693         (13,063      (11,392

Depreciation

     7,866         5,569         (1,546      11,889   

Amortization

     21,298         484         17,726         39,508   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma EBITDA

   $ 45,255       $ 10,243       $ —         $ 55,498   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma adjusted EBITDA

           

EBITDA

   $ 45,255       $ 10,243       $ —         $ 55,498   

Stock-based compensation

     3,971         4,304         —           8,275   

Loss on sale of assets

     40         110         —           150   

Loss of unconsolidated entities

     1,108         —           —           1,108   

Changes in deferred revenue

     14,933         2,310         82         17,325   

Impact of reduced fair value of deferred domain registration costs

     (678      —           —           (678

Transaction expenses and charges

     1,523         —           —           1,523   

Legal advisory expenses

     —           —           —           —     

Integration and restructuring expenses

     1,418         —           —           1,418   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma adjusted EBITDA

   $ 67,570       $ 16,967       $ 82       $ 84,619   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(3) In September 2015, we acquired substantially all of the assets of Ace Data Centers, Inc., or Ace DC, and all of the ownership interests in Ace Holdings, LLC, or ACE Holdings, for an aggregate purchase price of $73.3 million, of which $44.4 million was paid in cash at the closing. Ace DC was the manager of our data center, while Ace Holdings owned the real property, improvements and building at and on which the data center is located, including certain non-systems equipment and personal property. Adjusted EBITDA for Ace Data Center reflects the run-rate adjusted EBITDA of Ace DC.
(4) Represents estimated combined annual run-rate transaction synergies expected to be fully realized by the end of 2016. The cost savings are expected to result primarily from enhanced operational and financial scale. We cannot assure you that any or all of these synergies will be achieved. See “Risk Factors—Risks Related to Our Business and Our Industry—The Acquisition of Constant Contact may not achieve the intended benefits or may disrupt our current plans and operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 9, 2016.
(5) Acquisition pro forma adjusted EBITDA is a non-GAAP financial measure that we define as pro forma adjusted EBITDA plus estimated annual run-rate synergies and the run-rate adjusted EBITDA of Ace DC.

 

9