EX-99.1 3 d838833dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

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 International Group Holdings, Inc. (hereinafter referred to as “Endurance,” “we,” “our,” “us,” and similar terms unless the context indicates otherwise) and SinglePlatform, LLC (“SinglePlatform”), and has been prepared to give effect to Endurance’s disposition of the assets and liabilities of SinglePlatform (the “Disposition”).

The unaudited pro forma condensed combined financial information is also based upon the historical information of LTD Software LLC (the “Ecomdash Seller”), and has been prepared to give effect to Endurance’s acquisition from the Ecomdash Seller of substantially all of the assets of Ecomdash (the “Acquisition”), which took place on September 13, 2019.

The unaudited pro forma condensed combined balance sheet data as of September 30, 2019 give effect to the Disposition as if it had occurred as of September 30, 2019. The unaudited pro forma condensed combined statements of operations data for the year ended December 31, 2018 and the nine months ended September 30, 2019 give effect to the Acquisition and the Disposition as if they had occurred as of January 1, 2018. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition and Disposition, (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 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 Acquisition and Disposition been completed as of the dates indicated or that may be achieved in the future.

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 Ecomdash 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, 2018 from our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 21, 2019; the audited financial statements and accompanying notes of LTD Software LLC for the year ended December 31, 2018 from our Current Report on Form 8-K filed with the SEC on September 16, 2019; the unaudited pro forma condensed combined financial information for Ecomdash from our Current Report on Form 8-K filed with the SEC on October 30, 2019; and the unaudited consolidated financial statements and accompanying notes of Endurance for the nine months ended September 30, 2019 from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 filed with the SEC on November 4, 2019.


Endurance International Group Holdings, Inc. and SinglePlatform, LLC

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2019

(in thousands)

 

     Historical              
     Endurance      SinglePlatform     Pro Forma
Adjustments
    Pro Forma
Combined
 

Assets

  

Current assets:

         

Cash and cash equivalents

   $ 84,465      $ —       $ 2,413 A1, C1, D1    $ 86,878  

Restricted cash

     1,832        (210     —         1,622  

Accounts receivable

     12,139        (397     —         11,742  

Prepaid domain name registry fees

     56,555        —         —         56,555  

Prepaid commissions

     40,528        —         —         40,528  

Prepaid and refundable taxes

     13,070        —         —         13,070  

Prepaid expenses and other current assets

     23,137        (1,383     —         21,754  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     231,726        (1,990     2,413       232,149  

Property and equipment—net

     86,318        (717     —         85,601  

Operating lease right-of-use assets

     98,064        (2,425     —         95,639  

Goodwill

     1,854,829        (7,864     —         1,846,965  

Other intangible assets—net

     273,329        —         —         273,329  

Deferred financing costs—net

     2,000        —         —         2,000  

Investments

     15,000        —         —         15,000  

Prepaid domain name registry fees, net of current portion

     11,139        —         —         11,139  

Prepaid commissions, net of current portion

     47,776        (921     —         46,855  

Other assets

     2,292        —         —         2,292  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,622,473      $ (13,917   $ 2,413     $ 2,610,969  
  

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

         

Current liabilities:

         

Accounts payable

   $ 10,171      $ (90   $ —       $ 10,081  

Accrued expenses

     67,267        (1,042     2,203 B1      68,428  

Accrued taxes

     1,783        —         —         1,783  

Accrued interest

     14,526        —         —         14,526  

Deferred revenue

     375,729        (1,998     —         373,731  

Operating lease liabilities—short term

     22,474        (1,129     —         21,345  

Current portion of notes payable

     31,606        —         —         31,606  

Current portion of financed equipment

     2,637        —         —         2,637  

Deferred consideration—short term

     2,181        —         —         2,181  

Other current liabilities

     2,216        —         —         2,216  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     530,590        (4,259     2,203       528,534  

Long-term deferred revenue

     99,257        —         —         99,257  

Operating lease liabilities—long term

     84,594        (1,449     —         83,145  

Notes payable—long term

     1,703,065        —         (48,797 )D1      1,654,268  

Financed equipment—long term

     —          —         —         —    

Deferred tax liability

     20,231        (262     —         19,969  

Deferred consideration—long term

     —          —         —         —    

Other liabilities

     6,308        —         —         6,308  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     2,444,045        (5,970     (46,594     2,391,481  
  

 

 

    

 

 

   

 

 

   

 

 

 

Stockholders’ equity

     178,428        (7,947     49,007 A1, B1, C1      219,488  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,622,473      $ (13,917   $ 2,413     $ 2,610,969  
  

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


The unaudited balance sheet as of September 30, 2019 reflects the following pro forma adjustments:

(A1) The following table reflects the reclassification of restricted cash that is being returned to Endurance as a result of the Disposition:

 

     Amount  
     (in thousands)  

Restricted cash

   $ 210  
  

 

 

 

Total returned to Endurance

   $ 210  
  

 

 

 

(B1) The following table reflects transaction costs incurred by Endurance during the Disposition:

 

     Amount  
     (in thousands)  

Retention bonuses

   $ 1,918  

Legal fees related to the Disposition

     250  

Audits/reviews of pro forma financial statements

     35  
  

 

 

 

Total transaction costs

   $ 2,203  
  

 

 

 

(C1) The following table reflects the purchase consideration (gross proceeds) at the time of closing:

 

     Amount  
     (in thousands)  

Purchase consideration received in cash

   $ 51,000  

Holdback

     —    
  

 

 

 

Total purchase consideration

   $ 51,000  
  

 

 

 

(D1) The following table reflects Endurance’s intended use of net proceeds from the Disposition:

 

     Amount  
     (in thousands)  

Repayment of term loan (see Note 2)

   $ 48,797  
  

 

 

 

Total proceeds

   $ 48,797  
  

 

 

 

The unaudited balance sheet as of September 30, 2019 does not reflect any pro forma adjustments for the Acquisition, as it had taken place prior to September 30, 2019, and is already included in the historical Endurance numbers.


Endurance International Group Holdings, Inc. and SinglePlatform, LLC

Unaudited Pro Forma Condensed Combined Statement of Operations

Twelve Months Ended December 31, 2018

(in thousands)

 

     Historical                                      
     Endurance     Ecomdash     Pro Forma
Adjustments
    Historical
Adjusted for
Ecomdash
    SinglePlatform     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 1,145,291     $ 1,596     $ —       $ 1,146,887     $ (28,360   $ —       $ 1,118,527  

Cost of Revenue

     520,737       542       390     521,669       (6,742     716 A1      515,643  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     624,554       1,054       (390     625,218       (21,618     (716     602,884  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expense:

              

Sales and marketing

     265,424       —         —         265,424       (9,525     330 A1      256,229  

Engineering and development

     87,980       —         —         87,980       (4,018     —         83,962  

General and administrative

     124,204       1,439       —         125,643       (4,905     1,815 A1      122,553  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     477,608       1,439       —         479,047       (18,448     2,145       462,744  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     146,946       (385     (390     146,171       (3,170     (2,861     140,140  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

              

Interest income

     1,089       —         —         1,089       —         —         1,089  

Interest expense

     (149,480     (218     —         (149,698     —         2,098 B1      (147,600
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense—net

     (148,391     (218     —         (148,609     —         2,098       (146,511
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (1,445     (603     (390     (2,438     (3,170     (763     (6,371

Income tax benefit

     (6,246     —         (143 )B      (6,389     (673     (110 )C1      (7,172
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity earnings of unconsolidated entities

     4,801       (603     (247     3,951       (2,497     (653     801  

Equity loss of unconsolidated entities, net of tax

     267       —         —         267       —         —         267  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 4,534     $ (603   $ (247   $ 3,684     $ (2,497   $ (653   $ (534
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


(A) The following table reflects the pro forma adjustment relating to the amortization of intangible assets acquired as part of the Acquisition, including the cost and estimated useful life in years:

 

Amortization of intangible assets    Cost      Useful life      Amortization  
     (in thousands)      (in years)      (in thousands)  

Customer relationships

   $ 390        15      $ 41  

Developed technology

     2,445        7        349  
        

 

 

 

Total adjustment to amortization

         $ 390  
        

 

 

 

(B) The following table reflects the effective tax rate post acquisition, which is the blended rate for state and federal taxes:

 

     Tax rate  

Effective tax rate post acquisition

     14.4
  

 

 

 

(A1) The following table reflects the fixed group costs allocated to SinglePlatform that will continue to be incurred by Endurance post disposition:

 

     Amounts  
     (in thousands)  

Support costs

   $ 716  

Sales and marketing costs allocated

     330  

General and administrative costs allocated

     1,815  
  

 

 

 

Total

   $ 2,861  
  

 

 

 

(B1) The following table reflects the impact on interest expense as a result of the use of the net proceeds from the Disposition to repay the term loan (see Note 2):

 

     Amounts  
     (dollars in thousands)  

Interest rate

     5.67

Term loan repayment

   $ 48,797  
  

 

 

 

Total interest expense saved for twelve months

   $ 2,098  
  

 

 

 

(C1) The following table reflects the effective tax rate post disposition, which is the blended rate for state and federal taxes.

 

     Tax rate  

Effective tax rate post acquisition

     14.4
  

 

 

 


Endurance International Group Holdings, Inc. and SinglePlatform, LLC

Unaudited Pro Forma Condensed Combined Statement of Operations

Nine Months Ended September 30, 2019

(in thousands)

 

     Historical                                      
     Endurance     Ecomdash     Pro Forma
Adjustments
    Historical
Adjusted for
Ecomdash
    SinglePlatform     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenue

   $ 836,080     $ 1,308     $ —       $ 837,388     $ (20,633   $ —       $ 816,755  

Cost of Revenue

     384,196       387       292     384,875       (4,875     479 A1      380,479  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     451,884       921       (292     452,513       (15,758     (479     436,276  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expense:

              

Sales and marketing

     191,221       —         —         191,221       (7,253     226 A1      184,194  

Engineering and development

     77,299       —         —         77,299       (3,302     —         73,997  

General and administrative

     92,826       1,083       —         93,909       (3,760     1,452 A1      91,601  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     361,346       1,083       —         362,429       (14,315     1,678       349,792  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     90,538       (162     (292     90,084       (1,443     (2,157     86,484  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

              

Interest income

     910       —         —         910       —         —         910  

Interest expense

     (110,308     (126     —         (110,434     —         1,573 B1      (108,861
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense—net

     (109,398     (126     —         (109,524     —         1,573       (107,951
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity earnings of unconsolidated entities

     (18,860     (288     (292     (19,440     (1,443     (584     (21,467

Income tax expense

     3,040       —         62     3,102       (312     62 C1      2,853  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before equity earnings of unconsolidated entities

     (21,900     (288     (354     (22,542     (1,131     (646     (24,320

Equity loss of unconsolidated entities, net of tax

     —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (21,900   $ (288   $ (354   $ (22,542   $ (1,131   $ (646   $ (24,320
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial information.


(A) The following table reflects the pro forma adjustment relating to the amortization of intangible assets acquired, including the cost and estimated useful life in years.

 

Amortization of intangible assets    Cost      Useful life      Amortization  
     (in thousands)      (in years)      (in thousands)  

Customer relationships

   $ 390        15      $ 31  

Developed technology

     2,445        7        261  
        

 

 

 

Total adjustment to amortization

         $ 292  
        

 

 

 

(B) The following table reflects the effective tax rate post acquisition, which is the blended rate for state and federal taxes.

 

     Tax rate  

Effective tax rate post acquisition

     (10.7 )% 
  

 

 

 

(A1) The following table reflects the fixed group costs allocated to SinglePlatform that will continue to be incurred by Endurance post acquisition.

 

     Amounts  
     (in thousands)  

Support costs

   $ 479  

Sales and marketing costs allocated

     226  

General and administrative costs allocated

     1,452  
  

 

 

 

Total

   $ 2,157  
  

 

 

 

(B1) The following table reflects the impact on interest expense as a result of the use of the net proceeds from the Disposition to repay the term loan (see Note 2):

 

     Amounts  
     (dollars in thousands)  

Interest rate

     5.67

Term loan repayment

   $ 48,797  
  

 

 

 

Total interest expense saved for nine months

   $ 1,573  
  

 

 

 

(C1) The following table reflects the effective tax rate post acquisition, which is the blended rate for state and federal taxes.

 

     Tax rate  

Effective tax rate post acquisition

     (10.7 )% 
  

 

 

 


Note 1—Basis of Presentation

The unaudited pro forma condensed combined balance sheet data as of September 30, 2019 give effect to the Disposition as if it had occurred as of September 30, 2019. The unaudited pro forma condensed combined statements of operations data for the twelve months ended December 31, 2018 and for the nine months ended September 30, 2019 give effect to the Acquisition and the Disposition as if they had occurred as of January 1, 2018. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition and Disposition, (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.

We have accounted for the Disposition using the ASC 360-10 “Impairment or Disposal of Long-Lived Assets”.

The pro forma adjustments described above were developed based on Endurance’s assumptions and estimates, including assumptions relating to the consideration received and the allocation thereof to the assets acquired and liabilities assumed from Ecomdash 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 from cash and cash equivalents of Endurance, and to a lesser extent, through deferred consideration.

The pro forma adjustments relating to the Disposition were developed based on Endurance’s assumptions and estimates for SinglePlatform carve-out financial statements and estimates for the use of proceeds. The final use of proceeds may differ from what is currently reflected in the unaudited pro forma condensed combined financial information.

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 and Disposition 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.

Endurance historically has recorded all amortization expense related to acquired intangible assets as a cost of revenue. The unaudited combined condensed financial information reflects all amortization expense related to intangible assets as a cost of revenue.

Note 2—Use of Proceeds

Endurance is required under its first lien term loan facility and the indenture governing its senior notes to use the proceeds from the Disposition either to make additional debt repayments or to reinvest in assets useful to the business. Endurance expects to use the net proceeds from the Disposition to make additional debt repayments against its term loan. The unaudited combined condensed financial information reflects the impact of these additional loan repayments on the term loan balance and the related interest expense.

Note 3—Preliminary Allocation of Purchase Consideration of Ecomdash

The aggregate purchase price for the Ecomdash acquisition was $9.6 million, of which approximately $8.9 million was paid in cash at the closing. Endurance retained the remainder of the purchase price as a holdback to fund any working capital adjustment, if applicable, and to serve as security for the indemnification obligations of the Seller under the asset purchase agreement. Subject to any working capital adjustment and indemnification claims, Endurance will release the holdback funds to the Seller twelve (12) months from the closing date.


Transaction costs were expensed as incurred. Endurance has accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

Goodwill related to the acquisition is deductible for tax purposes.

The following table summarizes the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed at the date of acquisition:

 

     September 13, 2019  
     (in thousands)  

Working capital

   $ (163

Goodwill

     6,953  

Developed technology

     2,445  

Subscriber relationships

     390  
  

 

 

 

Total

   $ 9,625  
  

 

 

 

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

Note 4—Expected Future Amortization

The table below reflects the expected amortization related to the preliminary fair value of the intangible assets acquired for the five years following the Acquisition (in thousands):

 

     Year following the Acquisition  
     Year 1      Year 2      Year 3      Year 4      Year 5  

Customer relationships

   $ 41      $ 46      $ 47      $ 43      $ 40  

Developed technology

     349        350        349        349        349  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 390      $ 396      $ 396      $ 392      $ 389