ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 46-3044956 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
10 Corporate Drive, Suite 300 Burlington, Massachusetts | 01803 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ý | ||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | ||
Emerging growth company | ¨ |
Page | |
PART I. FINANCIAL INFORMATION | |
Item 1. Financial Statements (unaudited) | |
December 31, 2017 | September 30, 2018 | ||||||
Assets | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 66,493 | $ | 89,674 | |||
Restricted cash | 2,625 | 1,832 | |||||
Accounts receivable | 15,945 | 14,105 | |||||
Prepaid domain name registry fees | 53,805 | 57,114 | |||||
Prepaid commissions | — | 41,744 | |||||
Prepaid expenses and other current assets | 29,327 | 27,101 | |||||
Total current assets | 168,195 | 231,570 | |||||
Property and equipment—net | 95,452 | 79,315 | |||||
Goodwill | 1,850,582 | 1,849,264 | |||||
Other intangible assets—net | 455,440 | 377,670 | |||||
Deferred financing costs—net | 3,189 | 2,879 | |||||
Investments | 15,267 | 15,266 | |||||
Prepaid domain name registry fees, net of current portion | 10,806 | 11,337 | |||||
Prepaid commissions, net of current portion | — | 42,081 | |||||
Other assets | 2,155 | 9,021 | |||||
Total assets | $ | 2,601,086 | $ | 2,618,403 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 11,058 | $ | 10,812 | |||
Accrued expenses | 79,991 | 70,204 | |||||
Accrued interest | 24,457 | 15,109 | |||||
Deferred revenue | 361,940 | 380,564 | |||||
Current portion of notes payable | 33,945 | 31,606 | |||||
Current portion of capital lease obligations | 7,630 | 7,595 | |||||
Deferred consideration—short term | 4,365 | 2,386 | |||||
Other current liabilities | 4,031 | 3,753 | |||||
Total current liabilities | 527,417 | 522,029 | |||||
Long-term deferred revenue | 90,972 | 96,419 | |||||
Notes payable—long term, net of original issue discounts of $25,811 and $22,445 and deferred financing costs of $37,736 and $33,515, respectively | 1,858,300 | 1,792,436 | |||||
Capital lease obligations—long term | 7,719 | 2,067 | |||||
Deferred tax liability | 19,696 | 36,498 | |||||
Deferred consideration—long term | 3,551 | 1,342 | |||||
Other liabilities | 10,426 | 11,014 | |||||
Total liabilities | 2,518,081 | 2,461,805 | |||||
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; 140,190,695 and 143,306,748 shares issued at December 31, 2017 and September 30, 2018, respectively; 140,190,695 and 143,306,411 outstanding at December 31, 2017 and September 30, 2018, respectively | 14 | 14 | |||||
Additional paid-in capital | 931,033 | 953,971 | |||||
Accumulated other comprehensive loss | (541 | ) | (1,034 | ) | |||
Accumulated deficit | (847,501 | ) | (796,353 | ) | |||
Total stockholders’ equity | 83,005 | 156,598 | |||||
Total liabilities and stockholders’ equity | $ | 2,601,086 | $ | 2,618,403 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Revenue | $ | 295,222 | $ | 283,770 | $ | 882,617 | $ | 862,896 | |||||||
Cost of revenue | 158,865 | 128,945 | 454,197 | 393,597 | |||||||||||
Gross profit | 136,357 | 154,825 | 428,420 | 469,299 | |||||||||||
Operating expense: | |||||||||||||||
Sales and marketing | 66,276 | 63,831 | 211,154 | 197,733 | |||||||||||
Engineering and development | 19,882 | 22,683 | 60,393 | 64,559 | |||||||||||
General and administrative | 51,269 | 25,693 | 130,929 | 95,212 | |||||||||||
Transaction expenses | — | — | 773 | — | |||||||||||
Total operating expense | 137,427 | 112,207 | 403,249 | 357,504 | |||||||||||
(Loss) income from operations | (1,070 | ) | 42,618 | 25,171 | 111,795 | ||||||||||
Other income (expense): | |||||||||||||||
Other income (expense), net | (600 | ) | — | (600 | ) | — | |||||||||
Interest income | 203 | 289 | 506 | 720 | |||||||||||
Interest expense | (35,848 | ) | (37,527 | ) | (121,022 | ) | (111,923 | ) | |||||||
Total other expense—net | (36,245 | ) | (37,238 | ) | (121,116 | ) | (111,203 | ) | |||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | (37,315 | ) | 5,380 | (95,945 | ) | 592 | |||||||||
Income tax expense | 2,982 | 11,715 | 11,384 | 8,826 | |||||||||||
Loss before equity earnings of unconsolidated entities | (40,297 | ) | (6,335 | ) | (107,329 | ) | (8,234 | ) | |||||||
Equity (income) loss of unconsolidated entities, net of tax | (33 | ) | — | (72 | ) | 2 | |||||||||
Net loss | $ | (40,264 | ) | $ | (6,335 | ) | $ | (107,257 | ) | $ | (8,236 | ) | |||
Net loss attributable to non-controlling interest | — | — | 277 | — | |||||||||||
Excess accretion of non-controlling interest | — | — | 7,247 | — | |||||||||||
Total net loss attributable to non-controlling interest | — | — | 7,524 | ||||||||||||
Net loss attributable to Endurance International Group Holdings, Inc. | $ | (40,264 | ) | $ | (6,335 | ) | $ | (114,781 | ) | $ | (8,236 | ) | |||
Comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments | 1,070 | (644 | ) | 2,984 | (2,489 | ) | |||||||||
Unrealized gain (loss) on cash flow hedge, net of taxes of $48 and $256, and $(182) and $626 for the three and nine months ended September 30, 2017 and 2018, respectively | 83 | 812 | (309 | ) | 1,996 | ||||||||||
Total comprehensive loss | $ | (39,111 | ) | $ | (6,167 | ) | $ | (112,106 | ) | $ | (8,729 | ) | |||
Basic net loss per share attributable to Endurance International Group Holdings, Inc. | $ | (0.29 | ) | $ | (0.04 | ) | $ | (0.84 | ) | $ | (0.06 | ) | |||
Diluted net loss per share attributable to Endurance International Group Holdings, Inc. | $ | (0.29 | ) | $ | (0.04 | ) | $ | (0.84 | ) | $ | (0.06 | ) | |||
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.: | |||||||||||||||
Basic | 137,793,609 | 143,107,122 | 136,688,115 | 141,946,574 | |||||||||||
Diluted | 137,793,609 | 143,107,122 | 136,688,115 | 141,946,574 |
Nine Months Ended September 30, | ||||||||
2017 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (107,257 | ) | $ | (8,236 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation of property and equipment | 40,733 | 36,753 | ||||||
Amortization of other intangible assets | 104,554 | 77,890 | ||||||
Impairment of long lived assets | 13,848 | — | ||||||
Impairment of investments | 600 | — | ||||||
Amortization of deferred financing costs | 5,403 | 4,708 | ||||||
Amortization of net present value of deferred consideration | 504 | 311 | ||||||
Dividend from minority interest | 100 | — | ||||||
Amortization of original issue discounts | 2,791 | 3,209 | ||||||
Stock-based compensation | 48,749 | 21,932 | ||||||
Deferred tax expense (benefit) | 6,442 | 8,839 | ||||||
(Gain) loss on sale of assets | (317 | ) | 191 | |||||
(Gain) loss of unconsolidated entities | (72 | ) | 2 | |||||
Financing costs expensed | 5,487 | 1,228 | ||||||
Loss on early extinguishment of debt | 992 | 331 | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (872 | ) | 1,687 | |||||
Prepaid expenses and other current assets | (510 | ) | (3,033 | ) | ||||
Accounts payable and accrued expenses | (7,309 | ) | (15,721 | ) | ||||
Deferred revenue | 15,000 | 3,502 | ||||||
Net cash provided by operating activities | 128,866 | 133,593 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (32,095 | ) | (22,343 | ) | ||||
Proceeds from sale of assets | 292 | 6 | ||||||
Purchases of intangible assets | (1,966 | ) | — | |||||
Net cash used in investing activities | (33,769 | ) | (22,337 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of term loan and notes, net of original issue discounts | 1,693,007 | 1,580,305 | ||||||
Repayments of term loans | (1,733,147 | ) | (1,656,094 | ) | ||||
Payment of financing costs | (6,304 | ) | (1,580 | ) | ||||
Payment of deferred consideration | (5,408 | ) | (4,500 | ) | ||||
Payment of redeemable non-controlling interest | (25,000 | ) | — | |||||
Principal payments on capital lease obligations | (5,679 | ) | (5,609 | ) | ||||
Proceeds from exercise of stock options | 1,548 | 756 | ||||||
Net cash used in financing activities | (80,983 | ) | (86,722 | ) | ||||
Net effect of exchange rate on cash and cash equivalents and restricted cash | 2,156 | (2,146 | ) | |||||
Net increase in cash and cash equivalents and restricted cash | 16,270 | 22,388 | ||||||
Cash and cash equivalents and restricted cash: | ||||||||
Beginning of period | 56,898 | 69,118 | ||||||
End of period | $ | 73,168 | $ | 91,506 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | 118,276 | $ | 110,139 | ||||
Income taxes paid | $ | 3,958 | $ | 3,725 |
Building | Thirty-five years | |
Software | Two to three years | |
Computers and office equipment | Three years | |
Furniture and fixtures | Five years | |
Leasehold improvements | Shorter of useful life or remaining term of the lease |
• | Identification of the contract, or contracts, with the customer |
• | Identification of the performance obligations in the contract |
• | Determination of the transaction price |
• | Allocation of the transaction price to the performance obligations in the contract |
• | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
Short-term | Long-term | ||||||
(in thousands) | |||||||
Balance at December 31, 2017 | $ | 361,940 | $ | 90,972 | |||
Effect of adoption of ASC 606 to balances at December 31, 2017 | 20,275 | 2,882 | |||||
Recognition of the beginning deferred revenue into revenue, as a result of performance obligations satisfied | (331,939 | ) | — | ||||
Cash received in advance during the period | 657,821 | 193,119 | |||||
Recognition of cash received in the period into revenue, as a result of performance obligations satisfied | (518,087 | ) | — | ||||
Reclassification between short-term and long-term | 190,554 | (190,554 | ) | ||||
Balance at September 30, 2018 | $ | 380,564 | $ | 96,419 |
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Remaining performance obligation, short-term | $ | 265,984 | $ | 55,055 | $ | 59,525 | $ | 380,564 | |||||||
Remaining performance obligation, long-term | 81,805 | — | 14,614 | 96,419 | |||||||||||
Total | $ | 347,789 | $ | 55,055 | $ | 74,139 | $ | 476,983 |
Short-term | Long-term | ||||||
(in thousands) | |||||||
Balance at December 31, 2017 | $ | — | $ | — | |||
Adjustments resulting from adoption of ASC 606 | 43,408 | 40,040 | |||||
Deferred customer acquisition costs incurred in the period | 13,391 | 25,307 | |||||
Amounts recognized as expense in the period | (38,192 | ) | — | ||||
Impact of foreign exchange rates | (142 | ) | 13 | ||||
Reclassification between short-term and long-term | 23,279 | (23,279 | ) | ||||
Balance at September 30, 2018 | $ | 41,744 | $ | 42,081 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(unaudited) (in thousands, except share amounts and per share data) | |||||||||||||||
Net loss attributable to Endurance International Group Holdings, Inc. | $ | (40,264 | ) | $ | (6,335 | ) | $ | (114,781 | ) | $ | (8,236 | ) | |||
Net loss per share attributable to Endurance International Group Holdings, Inc.: | |||||||||||||||
Basic net loss per share attributable to Endurance International Group Holdings, Inc. | $ | (0.29 | ) | $ | (0.04 | ) | $ | (0.84 | ) | $ | (0.06 | ) | |||
Diluted net loss per share attributable to Endurance International Group Holdings, Inc. | $ | (0.29 | ) | $ | (0.04 | ) | $ | (0.84 | ) | $ | (0.06 | ) | |||
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.: | |||||||||||||||
Basic | 137,793,609 | 143,107,122 | 136,688,115 | 141,946,574 | |||||||||||
Diluted | 137,793,609 | 143,107,122 | 136,688,115 | 141,946,574 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||
(unaudited) | |||||||||||
Restricted stock awards and units | 7,782,806 | 6,915,158 | 6,974,708 | 6,470,097 | |||||||
Options | 10,593,596 | 8,362,719 | 10,947,661 | 8,644,464 | |||||||
Total | 18,376,402 | 15,277,877 | 17,922,369 | 15,114,561 |
For the three months ended September 30, 2018 under topic 606 | For the three months ended September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated statement of operations and comprehensive loss data | (in thousands) | ||||||||
Revenue | $ | 283,770 | $ | 284,343 | $ | (573 | ) | ||
Cost of revenue | 128,945 | 128,583 | 362 | ||||||
Sales and marketing | 63,831 | 63,816 | 15 | ||||||
As of September, 2018 under topic 606 | As of September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated balance sheet data | (in thousands) | ||||||||
Prepaid commissions, current portion | $ | 41,744 | $ | — | $ | 41,744 | |||
Prepaid commissions, long-term | 42,081 | — | 42,081 | ||||||
Deferred revenue, current | 380,564 | 379,343 | 1,221 | ||||||
Deferred revenue, long-term | 96,419 | 96,419 | — | ||||||
For the three months ended September 30, 2018 under topic 606 | For the three months ended September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated statement of cash flow data | (in thousands) | ||||||||
Net (loss) income | $ | (6,335 | ) | $ | (6,139 | ) | $ | (196 | ) |
Change in prepaid expenses and other assets | 5,527 | 5,904 | (377 | ) | |||||
Change in deferred revenue | (4,691 | ) | (4,118 | ) | 573 | ||||
Cash flows from operations | 51,341 | 51,341 | — | ||||||
For the nine months ended September 30, 2018 under topic 606 | For the nine months ended September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated statement of operations and comprehensive loss data | (in thousands) | ||||||||
Revenue | $ | 862,896 | $ | 864,117 | $ | (1,221 | ) | ||
Cost of revenue | 393,597 | 393,345 | 252 | ||||||
Sales and marketing | 197,733 | 198,240 | (507 | ) | |||||
As of September, 2018 under topic 606 | As of September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated balance sheet data | (in thousands) | ||||||||
Prepaid commissions, current portion | $ | 41,744 | $ | — | $ | 41,744 | |||
Prepaid commissions, long-term | 42,081 | — | 42,081 | ||||||
Deferred revenue, current | 380,564 | 379,343 | 1,221 | ||||||
Deferred revenue, long-term | 96,419 | 96,419 | — | ||||||
For the nine months ended September 30, 2018 under topic 606 | For the nine months ended September 30, 2018 under topic 605 | Increase (decrease) | |||||||
Consolidated statement of cash flow data | (in thousands) | ||||||||
Net (loss) income | $ | (8,236 | ) | $ | (7,270 | ) | $ | (966 | ) |
Change in prepaid expenses and other assets | (3,033 | ) | (2,778 | ) | (255 | ) | |||
Change in deferred revenue | 3,502 | 4,723 | 1,221 | ||||||
Cash flows from operations | 133,593 | 133,593 | — |
Three Months Ended March 31, 2018 | Three Months Ended June 30, 2018 | ||||||||||||||||||
Originally Filed | Adjustment | Revised | Originally Filed | Adjustment | Revised | ||||||||||||||
Loss before income taxes and equity earnings of unconsolidated subsidiaries | $ | (4,444 | ) | $ | — | $ | (4,444 | ) | $ | (344 | ) | $ | — | $ | (344 | ) | |||
Income tax expense (benefit) | 2,617 | (4,560 | ) | (1,943 | ) | 1,650 | (2,596 | ) | (946 | ) | |||||||||
Loss before equity earnings of unconsolidated subsidiaries | (7,061 | ) | $ | 4,560 | $ | (2,501 | ) | (1,994 | ) | $ | 2,596 | $ | 602 | ||||||
Equity (income) loss of unconsolidated subsidiaries | 27 | — | 27 | $ | (25 | ) | (25 | ) | |||||||||||
Net income (loss) | $ | (7,088 | ) | $ | 4,560 | $ | (2,528 | ) | $ | (1,969 | ) | $ | 2,596 | $ | 627 | ||||
Comprehensive income (loss) | |||||||||||||||||||
Foreign currency translation | 580 | — | 580 | (2,425 | ) | — | (2,425 | ) | |||||||||||
Unrealized (gain) loss on cash flow hedge, net of tax | 1,041 | — | 1,041 | 144 | — | 144 | |||||||||||||
Total comprehensive loss | $ | (5,467 | ) | $ | 4,560 | $ | (907 | ) | $ | (4,250 | ) | $ | 2,596 | $ | (1,654 | ) | |||
Basic net income (loss) per share | $ | (0.05 | ) | $ | 0.03 | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.01 | $0.00 | |||||
Diluted net income (loss) per share | $ | (0.05 | ) | $ | 0.03 | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0.01 | $0.00 | |||||
Weighted-average common shares used in computing net income (loss) per share | |||||||||||||||||||
Basic | 140,361,982 | — | 140,361,982 | 142,340,561 | — | 142,340,561 | |||||||||||||
Diluted | 140,361,982 | — | 140,361,982 | 142,340,561 | 2,361,441 | 144,702,002 |
Six Months Ended June 30, 2018 | |||||||||
Originally Filed | Adjustment | Revised | |||||||
Loss before income taxes and equity earnings of unconsolidated subsidiaries | $ | (4,788 | ) | $ | — | $ | (4,788 | ) | |
Income tax expense (benefit) | 4,267 | (7,156 | ) | (2,889 | ) | ||||
Loss before equity earnings of unconsolidated subsidiaries | (9,055 | ) | 7,156 | (1,899 | ) | ||||
Equity (income) loss of unconsolidated subsidiaries | 2 | — | 2 | ||||||
Net income (loss) | (9,057 | ) | 7,156 | $ | (1,901 | ) | |||
Comprehensive income (loss) | |||||||||
Foreign currency translation | (1,845 | ) | — | (1,845 | ) | ||||
Unrealized gain on cash flow hedge, net of tax | 1,184 | — | 1,184 | ||||||
Total comprehensive loss | (9,718 | ) | 7,156 | $ | (2,562 | ) | |||
Basic net income (loss) per share | $ | (0.06 | ) | $ | 0.05 | $ | (0.01 | ) | |
Diluted net income (loss) per share | $ | (0.06 | ) | $ | 0.05 | $ | (0.01 | ) | |
Weighted-average common shares used in computing net income (loss) per share | |||||||||
Basic | 141,356,567 | — | 141,356,567 | ||||||
Diluted | 141,356,567 | — | 141,356,567 |
March 31, 2018 | June 30, 2018 | ||||||||||||||||||
Originally Filed | Adjustment | Revised | Originally Filed | Adjustment | Revised | ||||||||||||||
Deferred tax liability | $ | 27,679 | $ | (4,560 | ) | $ | 23,119 | $ | 29,897 | $ | (7,156 | ) | $ | 22,741 | |||||
Total liabilities | 2,533,619 | (4,560 | ) | 2,529,059 | 2,490,106 | (7,156 | ) | 2,482,950 | |||||||||||
Accumulated deficit | (795,206 | ) | 4,560 | (790,646 | ) | (797,175 | ) | 7,156 | (790,019 | ) | |||||||||
Total stockholders' equity | 144,189 | 4,560 | 148,749 | 147,759 | 7,156 | 154,915 | |||||||||||||
Total liabilities and stockholders' equity | 2,677,808 | — | 2,677,808 | 2,637,865 | — | 2,637,865 |
Three Months Ended March 31, 2018 | Six Months Ended June 30, 2018 | ||||||||||||||||||
Originally Filed | Adjustment | Revised | Originally Filed | Adjustment | Revised | ||||||||||||||
Net income (loss) | $ | (7,088 | ) | $ | 4,560 | $ | (2,528 | ) | $ | (9,057 | ) | $ | 7,156 | $ | (1,901 | ) | |||
Deferred tax expense | 492 | (4,560 | ) | (4,068 | ) | 2,672 | (7,156 | ) | (4,484 | ) | |||||||||
Net cash provided by operating activities | 52,360 | — | 52,360 | 82,252 | — | 82,252 |
December 31, 2017 | September 30, 2018 | ||||||
(in thousands) | |||||||
Land | $ | 790 | $ | 790 | |||
Building | 5,037 | 7,294 | |||||
Software | 82,618 | 88,376 | |||||
Computers and office equipment | 153,273 | 158,188 | |||||
Furniture and fixtures | 18,825 | 19,259 | |||||
Leasehold improvements | 22,260 | 19,672 | |||||
Construction in process | 3,800 | 2,215 | |||||
Property and equipment—at cost | 286,603 | 295,794 | |||||
Less accumulated depreciation | (191,151 | ) | (216,479 | ) | |||
Property and equipment—net | $ | 95,452 | $ | 79,315 |
• | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
• | Level 2 inputs are quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. |
• | Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. |
Balance | Quoted Prices in Active Markets for Identical Items (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
(in thousands) | |||||||||||||||
Balance at December 31, 2017 | |||||||||||||||
Financial assets: | |||||||||||||||
Interest rate cap (included in other assets) | $ | 452 | — | $ | 452 | $ | — | ||||||||
Total financial assets | $ | 452 | $ | — | $ | 452 | $ | — | |||||||
Balance at September 30, 2018 | |||||||||||||||
Financial assets: | |||||||||||||||
Interest rate caps (included in other assets) | $ | 6,863 | — | $ | 6,863 | $ | — | ||||||||
Total financial assets | $ | 6,863 | $ | — | $ | 6,863 | $ | — |
Web Presence | Email Marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Goodwill balance at December 31, 2017 | $ | 1,216,419 | $ | 604,305 | $ | 29,858 | $ | 1,850,582 | |||||||
Foreign translation impact | (1,318 | ) | — | — | (1,318 | ) | |||||||||
Goodwill balance at September 30, 2018 | $ | 1,215,101 | $ | 604,305 | $ | 29,858 | $ | 1,849,264 |
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Useful Life | ||||||||||
(dollars in thousands) | |||||||||||||
Developed technology | $ | 285,911 | $ | 149,514 | $ | 136,397 | 7 years | ||||||
Subscriber relationships | 659,732 | 431,938 | 227,794 | 7 years | |||||||||
Trade-names | 134,054 | 73,019 | 61,035 | 8 years | |||||||||
Intellectual property | 34,313 | 27,336 | 6,977 | 5 years | |||||||||
Domain names available for sale | 30,458 | 7,221 | 23,237 | Indefinite | |||||||||
Total December 31, 2017 | $ | 1,144,468 | $ | 689,028 | $ | 455,440 |
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Useful Life | ||||||||||
(dollars in thousands) | |||||||||||||
Developed technology | $ | 284,312 | $ | 173,203 | $ | 111,109 | 7 years | ||||||
Subscriber relationships | 659,376 | 472,625 | 186,751 | 7 years | |||||||||
Trade-names | 134,046 | 81,740 | 52,306 | 8 years | |||||||||
Intellectual property | 34,306 | 28,566 | 5,740 | 5 years | |||||||||
Domain names available for sale | 30,855 | 9,091 | 21,764 | Indefinite | |||||||||
Total September 30, 2018 | $ | 1,142,895 | $ | 765,225 | $ | 377,670 |
At December 31, 2017 | At September 30, 2018 | |||||||
(in thousands) | ||||||||
2018 First Lien Term Loan | $ | — | $ | 1,493,131 | ||||
2017 First Lien Term Loan | 1,563,197 | — | ||||||
Notes | 329,048 | 330,911 | ||||||
Revolving credit facilities | — | — | ||||||
Total notes payable | 1,892,245 | 1,824,042 | ||||||
Current portion of notes payable | 33,945 | 31,606 | ||||||
Notes payable - long term | $ | 1,858,300 | $ | 1,792,436 |
At September 30, 2018 | ||||
(in thousands) | ||||
2018 First Lien Term Loan | $ | 1,530,002 | ||
Unamortized deferred financing costs | (19,594 | ) | ||
Unamortized original issue discount | (17,277 | ) | ||
Net 2018 First Lien Term Loan | 1,493,131 | |||
Current portion of 2018 First Lien Term Loan | 31,606 | |||
2018 First Lien Term Loan - long term | $ | 1,461,525 |
At December 31, 2017 | At September 30, 2018 | |||||||
(in thousands) | ||||||||
2017 First Lien Term Loan | $ | 1,605,792 | $ | — | ||||
Unamortized deferred financing costs | (22,456 | ) | — | |||||
Unamortized original issue discount | (20,139 | ) | — | |||||
Net 2017 First Lien Term Loan | 1,563,197 | — | ||||||
Current portion of 2017 First Lien Term Loan | 33,945 | — | ||||||
2017 First Lien Term Loan - long term | $ | 1,529,252 | $ | — |
At December 31, 2017 | At September 30, 2018 | |||||||
(in thousands) | ||||||||
Senior Notes | $ | 350,000 | $ | 350,000 | ||||
Unamortized deferred financing costs | (15,280 | ) | (13,921 | ) | ||||
Unamortized original issuance discount | (5,672 | ) | (5,168 | ) | ||||
Net Senior Notes | 329,048 | 330,911 | ||||||
Current portion of Senior Notes | — | — | ||||||
Senior Notes - long term | $ | 329,048 | $ | 330,911 |
Amounts maturing in: | (in thousands) | ||
(Remainder of) 2018 | $ | 7,902 | |
2019 | 31,606 | ||
2020 | 31,606 | ||
2021 | 31,606 | ||
2022 | 31,606 | ||
Thereafter | 1,745,676 | ||
Total | $ | 1,880,002 |
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2018 | ||||||||||||
(percentage per annum) | |||||||||||||||
Interest rate—LIBOR | 5.14%-5.32% | 5.81%-6.07% | 5.14%-6.68% | 5.46%-6.32% | |||||||||||
Interest rate—reference | * | * | * | * | |||||||||||
Interest rate—Senior Notes | 10.875 | % | 10.875 | % | 10.875 | % | 10.875 | % | |||||||
Non-refundable fee—unused facility | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % | |||||||
(dollars in thousands) | |||||||||||||||
Interest expense and service fees | $ | 32,551 | $ | 34,469 | $ | 105,371 | $ | 101,575 | |||||||
Loss on extinguishment of debt | — | — | 992 | 331 | |||||||||||
Deferred financing fees immediately expensed | — | — | 5,487 | 1,228 | |||||||||||
Amortization of deferred financing fees | 1,873 | 1,722 | 5,403 | 4,708 | |||||||||||
Amortization of original issue discounts | 1,059 | 1,083 | 2,791 | 3,209 | |||||||||||
Amortization of net present value of deferred consideration | 127 | 60 | 504 | 311 | |||||||||||
Other interest expense | 238 | 193 | 474 | 561 | |||||||||||
Total interest expense | $ | 35,848 | $ | 37,527 | $ | 121,022 | $ | 111,923 |
Total Stockholders’ Equity | |||
(in thousands) | |||
Balance at December 31, 2017 | $ | 83,005 | |
Stock-based compensation | 21,932 | ||
Reclassification of stock-compensation liability award | 250 | ||
Stock option exercises | 756 | ||
Foreign currency translation adjustment | (2,489 | ) | |
Unrealized gain on derivative | 1,996 | ||
Adjustment to beginning retained earnings resulting from adoption of ASC 606, net of tax impact of $7.0 million | 59,384 | ||
Net loss attributable to Endurance International Group Holdings, Inc. | (8,236 | ) | |
Balance at September 30, 2018 | $ | 156,598 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | 1,553 | $ | 828 | $ | 4,720 | $ | 3,223 | |||||||
Sales and marketing | 2,263 | 1,478 | 7,027 | 4,009 | |||||||||||
Engineering and development | 1,807 | 1,237 | 4,707 | 3,519 | |||||||||||
General and administrative | 13,956 | 4,007 | 32,295 | 11,181 | |||||||||||
Total stock-based compensation expense | $ | 19,579 | $ | 7,550 | $ | 48,749 | $ | 21,932 |
Stock Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value(3) (in thousands) | |||||||||
Outstanding at December 31, 2017 | 8,575,150 | $ | 12.30 | |||||||||
Granted | 611,010 | $ | 7.50 | |||||||||
Exercised | (19,049 | ) | $ | 8.09 | ||||||||
Forfeited | (304,382 | ) | $ | 12.79 | ||||||||
Expired | (1,516,912 | ) | $ | 13.56 | ||||||||
Outstanding at September 30, 2018 | 7,345,817 | $ | 11.63 | 5.1 | $ | 1,600 | ||||||
Exercisable at September 30, 2018 | 5,475,357 | $ | 12.39 | 3.9 | $ | 283 | ||||||
Expected to vest after September 30, 2018 (1) | 1,870,460 | $ | 9.39 | 8.4 | $ | 1,317 | ||||||
Exercisable as of September 30, 2018 and expected to vest (2) | 7,345,817 | $ | 11.63 | 5.1 | $ | 1,600 |
(1) | This represents the number of unvested options outstanding as of September 30, 2018 that are expected to vest in the future. |
(2) | This represents the number of vested options as of September 30, 2018 plus the number of unvested options outstanding as of September 30, 2018 that are expected to vest in the future. |
(3) | The aggregate intrinsic value was calculated based on the positive difference, if any, between the estimated fair value of the Company’s common stock on September 30, 2018 of $8.80 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options. |
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||
Non-vested at December 31, 2017 | 3,004,137 | $ | 7.93 | |||
Granted | 3,846,567 | $ | 7.55 | |||
Vested | (1,185,704 | ) | $ | 9.08 | ||
Canceled | (394,763 | ) | $ | 7.78 | ||
Non-vested at September 30, 2018 | 5,270,237 | $ | 7.67 |
Restricted Stock Awards | Weighted Average Grant Date Fair Value | |||||
Non-vested at December 31, 2017 | 3,432,946 | $ | 13.79 | |||
Granted | — | $ | — | |||
Vested | (819,886 | ) | $ | 12.29 | ||
Canceled | (2,134,075 | ) | $ | 14.85 | ||
Non-vested at September 30, 2018 | 478,985 | $ | 11.62 |
Stock Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value(3) (in thousands) | |||||||||
Outstanding at December 31, 2017 | 888,260 | $ | 8.75 | |||||||||
Granted | — | $ | — | |||||||||
Exercised | (92,229 | ) | $ | 6.53 | ||||||||
Forfeited | (10,256 | ) | $ | 10.47 | ||||||||
Expired | (38,652 | ) | $ | 9.21 | ||||||||
Outstanding at September 30, 2018 | 747,123 | $ | 8.98 | 3.7 | $ | 546 | ||||||
Exercisable at September 30, 2018 | 563,823 | $ | 8.76 | 3.5 | $ | 499 | ||||||
Expected to vest after September 30, 2018 (1) | 183,300 | $ | 9.65 | 4.2 | $ | 47 | ||||||
Exercisable as of September 30, 2018 and expected to vest (2) | 747,123 | $ | 8.98 | 3.7 | $ | 546 |
(1) | This represents the number of unvested options outstanding as of September 30, 2018 that are expected to vest in the future. |
(2) | This represents the number of vested options as of September 30, 2018 plus the number of unvested options outstanding as of September 30, 2018 that are expected to vest in the future. |
(3) | The aggregate intrinsic value was calculated based on the positive difference, if any, between the estimated fair value of the Company’s common stock on September 30, 2018 of $8.80 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options. |
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||
Non-vested at December 31, 2017 | 1,541,141 | $ | 8.30 | |||
Granted | 41,379 | $ | 7.25 | |||
Vested | (516,600 | ) | $ | 8.38 | ||
Canceled | (92,030 | ) | $ | 8.53 | ||
Non-vested at September 30, 2018 | 973,890 | $ | 8.20 |
Foreign Currency Translation Adjustments | Unrealized Gains (Losses) on Cash Flow Hedges | Total | ||||||||||
(in thousands) | ||||||||||||
Balance at December 31, 2017 | $ | 696 | $ | (1,237 | ) | $ | (541 | ) | ||||
Other comprehensive income (loss) | (2,489 | ) | 1,996 | (493 | ) | |||||||
Balance at September 30, 2018 | $ | (1,793 | ) | $ | 759 | $ | (1,034 | ) |
Three Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Subscriber revenue | |||||||||||||||
Direct revenue from subscribers | $ | 138,869 | $ | 100,816 | $ | 12,911 | $ | 252,596 | |||||||
Professional services | 3,387 | 299 | 103 | 3,789 | |||||||||||
Reseller revenue | 5,241 | 855 | 12,585 | 18,681 | |||||||||||
Total subscriber revenue | $ | 147,497 | $ | 101,970 | $ | 25,599 | $ | 275,066 | |||||||
Non-subscriber revenue | |||||||||||||||
MDF | $ | 2,199 | $ | 141 | $ | 252 | $ | 2,592 | |||||||
Premium domains | 3 | — | 5,067 | 5,070 | |||||||||||
Domain parking | 172 | — | 870 | 1,042 | |||||||||||
Total non-subscriber revenue | $ | 2,374 | $ | 141 | $ | 6,189 | $ | 8,704 | |||||||
Total revenue: | $ | 149,871 | $ | 102,111 | $ | 31,788 | $ | 283,770 | |||||||
Nine Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Subscriber revenue | |||||||||||||||
Direct revenue from subscribers | $ | 424,321 | $ | 302,583 | $ | 39,185 | $ | 766,089 | |||||||
Professional services | 10,091 | 1,045 | 300 | 11,436 | |||||||||||
Reseller revenue | 16,487 | 2,620 | 39,136 | 58,243 | |||||||||||
Total subscriber revenue | $ | 450,899 | $ | 306,248 | $ | 78,621 | $ | 835,768 | |||||||
Non-subscriber revenue | |||||||||||||||
MDF | $ | 6,012 | $ | 464 | $ | 473 | $ | 6,949 | |||||||
Premium domains | 70 | — | 15,823 | 15,893 | |||||||||||
Domain parking | 622 | — | 3,664 | 4,286 | |||||||||||
Total non-subscriber revenue | $ | 6,704 | $ | 464 | $ | 19,960 | $ | 27,128 | |||||||
Total revenue: | $ | 457,603 | $ | 306,712 | $ | 98,581 | $ | 862,896 |
Three Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Domestic | $ | 100,065 | $ | 93,992 | $ | 12,509 | $ | 206,566 | |||||||
International | 49,806 | 8,119 | 19,279 | 77,204 | |||||||||||
Total | $ | 149,871 | $ | 102,111 | $ | 31,788 | $ | 283,770 | |||||||
Nine Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Domestic | $ | 306,724 | $ | 281,717 | $ | 38,525 | $ | 626,966 | |||||||
International | 150,879 | 24,995 | 60,056 | 235,930 | |||||||||||
Total | $ | 457,603 | $ | 306,712 | $ | 98,581 | $ | 862,896 |
• | NOLs incurred from the Company’s inception to September 30, 2018; |
• | Expiration of various federal, state and foreign tax attributes; |
• | Reversals of existing temporary differences; |
• | Composition and cumulative amounts of existing temporary differences; and |
• | Forecasted profit before tax. |
Employee Severance | |||
(in thousands) | |||
Total | |||
Balance at December 31, 2017 | $ | 3,668 | |
Severance charges | 2,978 | ||
Cash paid | (5,646 | ) | |
Balance at September 30, 2018 | $ | 1,000 |
Facilities | |||
(in thousands) | |||
Total | |||
Balance at December 31, 2017 | $ | 6,005 | |
Facility adjustments | 43 | ||
Sublease income received | 322 | ||
Cash paid | (2,080 | ) | |
Balance at September 30, 2018 | $ | 4,290 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | 449 | $ | 37 | $ | 3,892 | $ | 1,443 | |||||||
Sales and marketing | 1,011 | 17 | 3,260 | 133 | |||||||||||
Engineering and development | 271 | 33 | 1,349 | 389 | |||||||||||
General and administrative | 2,758 | 110 | 6,083 | 1,056 | |||||||||||
Total restructuring charges | $ | 4,489 | $ | 197 | $ | 14,584 | $ | 3,021 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2017 | 2018 | 2017 | 2018 | |||||||||||
(in thousands) | ||||||||||||||
Cost of revenue | $ | 3,100 | $ | 3,330 | $ | 9,100 | $ | 10,555 | ||||||
Sales and marketing | 500 | 160 | 1,000 | 605 | ||||||||||
Engineering and development | 200 | 290 | 850 | 960 | ||||||||||
General and administrative | 50 | 20 | 150 | 65 | ||||||||||
Total related party transaction expense, net | $ | 3,850 | $ | 3,800 | $ | 11,100 | $ | 12,185 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2017 | 2018 | 2017 | 2018 | |||||||||||
(in thousands) | ||||||||||||||
Revenue | $ | (1,050 | ) | $ | (1,430 | ) | $ | (2,150 | ) | $ | (4,075 | ) | ||
Revenue (contra) | 1,850 | 1,800 | 4,050 | 6,140 | ||||||||||
Total related party transaction impact to revenue | $ | 800 | $ | 370 | $ | 1,900 | $ | 2,065 | ||||||
Cost of revenue | 150 | 170 | 350 | 490 | ||||||||||
Total related party transaction expense, net | $ | 950 | $ | 540 | $ | 2,250 | $ | 2,555 |
Three Months Ended September 30, 2017 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
(as revised) | |||||||||||||||
Revenue(1) | $ | 159,530 | $ | 101,526 | $ | 34,166 | $ | 295,222 | |||||||
Gross profit | $ | 77,032 | $ | 65,286 | $ | (5,961 | ) | $ | 136,357 | ||||||
Net (loss) income | $ | (20,403 | ) | $ | 2,202 | $ | (22,063 | ) | $ | (40,264 | ) | ||||
Interest expense, net(2) | 14,686 | 20,514 | 445 | 35,645 | |||||||||||
Income tax expense (benefit) | 798 | 1,323 | 861 | 2,982 | |||||||||||
Depreciation | 9,399 | 3,233 | 939 | 13,571 | |||||||||||
Amortization of other intangible assets | 14,884 | 18,770 | 1,693 | 35,347 | |||||||||||
Stock-based compensation | 15,510 | 1,668 | 2,402 | 19,580 | |||||||||||
Restructuring expenses | 3,468 | 682 | 339 | 4,489 | |||||||||||
(Gain) loss of unconsolidated entities | (33 | ) | — | — | (33 | ) | |||||||||
Impairment of other long-lived assets | 600 | — | 13,848 | 14,448 | |||||||||||
SEC investigations reserve | 4,323 | 2,751 | 926 | 8,000 | |||||||||||
Adjusted EBITDA | $ | 43,232 | $ | 51,143 | $ | (610 | ) | $ | 93,765 | ||||||
Three Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Revenue(1) | $ | 149,871 | $ | 102,111 | $ | 31,788 | $ | 283,770 | |||||||
Gross profit | $ | 75,074 | $ | 71,356 | $ | 8,395 | $ | 154,825 | |||||||
Net (loss) income | $ | (7,565 | ) | $ | 6,596 | $ | (5,366 | ) | $ | (6,335 | ) | ||||
Interest expense, net(2) | 18,132 | 17,128 | 1,978 | 37,238 | |||||||||||
Income tax expense (benefit) | 6,136 | 4,179 | 1,400 | 11,715 | |||||||||||
Depreciation | 8,401 | 2,538 | 950 | 11,889 | |||||||||||
Amortization of other intangible assets | 11,941 | 13,384 | 852 | 26,177 | |||||||||||
Stock-based compensation | 1,569 | 4,472 | 1,509 | 7,550 |
Restructuring expenses | 54 | 141 | 2 | 197 | |||||||||||
Shareholder litigation reserve | (768 | ) | — | (167 | ) | (935 | ) | ||||||||
Adjusted EBITDA | $ | 37,900 | $ | 48,438 | $ | 1,158 | $ | 87,496 | |||||||
Nine Months Ended September 30, 2017 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
(as revised) | |||||||||||||||
Revenue(1) | $ | 483,661 | $ | 298,401 | $ | 100,555 | $ | 882,617 | |||||||
Gross profit | $ | 229,186 | $ | 188,181 | $ | 11,053 | $ | 428,420 | |||||||
Net (loss) income | $ | (67,226 | ) | $ | (8,026 | ) | $ | (32,005 | ) | $ | (107,257 | ) | |||
Interest expense, net(2) | 50,877 | 68,212 | 1,427 | 120,516 | |||||||||||
Income tax expense (benefit) | 12,645 | (4,821 | ) | 3,560 | 11,384 | ||||||||||
Depreciation | 27,401 | 10,632 | 2,700 | 40,733 | |||||||||||
Amortization of other intangible assets | 44,431 | 55,697 | 4,426 | 104,554 | |||||||||||
Stock-based compensation | 38,023 | 5,392 | 5,334 | 48,749 | |||||||||||
Restructuring expenses | 8,944 | 4,743 | 897 | 14,584 | |||||||||||
Transaction expenses and charges | — | 773 | — | 773 | |||||||||||
(Gain) loss of unconsolidated entities | (72 | ) | — | — | (72 | ) | |||||||||
Impairment of other long-lived assets | 600 | — | 13,848 | 14,448 | |||||||||||
SEC investigations reserve | 4,323 | 2,751 | 926 | 8,000 | |||||||||||
Shareholder litigation reserve | — | — | — | — | |||||||||||
Adjusted EBITDA | $ | 119,946 | $ | 135,353 | $ | 1,113 | $ | 256,412 | |||||||
Nine Months Ended September 30, 2018 | |||||||||||||||
Web presence | Email marketing | Domain | Total | ||||||||||||
(in thousands) | |||||||||||||||
Revenue(1) | $ | 457,603 | $ | 306,712 | $ | 98,581 | $ | 862,896 | |||||||
Gross profit | $ | 225,149 | $ | 214,909 | $ | 29,241 | $ | 469,299 | |||||||
Net (loss) income | $ | (20,549 | ) | $ | 22,350 | $ | (10,037 | ) | $ | (8,236 | ) | ||||
Interest expense, net(2) | 53,503 | 50,866 | 6,834 | 111,203 | |||||||||||
Income tax expense (benefit) | 960 | 8,009 | (143 | ) | 8,826 | ||||||||||
Depreciation | 24,769 | 9,090 | 2,894 | 36,753 | |||||||||||
Amortization of other intangible assets | 35,812 | 39,716 | 2,362 | 77,890 | |||||||||||
Stock-based compensation | 12,066 | 7,168 | 2,698 | 21,932 | |||||||||||
Restructuring expenses | 1,654 | 723 | 644 | 3,021 | |||||||||||
(Gain) loss of unconsolidated entities | 2 | — | — | 2 | |||||||||||
Shareholder litigation reserve | 4,780 | 1,500 | 1,045 | 7,325 | |||||||||||
Adjusted EBITDA | $ | 112,997 | $ | 139,422 | $ | 6,297 | $ | 258,716 |
(1) | Revenue excludes intercompany transactions relating to domain sales and domain services from the domain segment to the web presence segment of $2.5 million and $8.1 million, respectively, for the three and nine months ended September 30, 2017, and $2.5 million and $7.6 million, respectively, for the three and nine months ended September 30, 2018. |
(2) | Interest expense includes impact of amortization of deferred financing costs, original issuance discounts and interest income. |
Three Months Ended September 30, 2017 | |||||||||||||||
Web presence | Domain | ||||||||||||||
(in thousands) | |||||||||||||||
(as reported) | (as revised) | (as reported) | (as revised) | ||||||||||||
Gross profit | $ | 75,097 | $ | 77,032 | $ | (4,026 | ) | $ | (5,961 | ) | |||||
Net loss | $ | (22,416 | ) | $ | (20,403 | ) | $ | (20,050 | ) | $ | (22,063 | ) | |||
Adjusted EBITDA | $ | 41,297 | $ | 43,232 | $ | 1,325 | $ | (610 | ) | ||||||
Nine Months Ended September 30, 2017 | |||||||||||||||
Web presence | Domain | ||||||||||||||
(in thousands) | |||||||||||||||
(as reported) | (as revised) | (as reported) | (as revised) | ||||||||||||
Gross profit | $ | 224,300 | $ | 229,186 | $ | 15,939 | $ | 11,053 | |||||||
Net loss | $ | (73,346 | ) | $ | (67,226 | ) | $ | (25,885 | ) | $ | (32,005 | ) | |||
Adjusted EBITDA | $ | 115,060 | $ | 119,946 | $ | 5,999 | $ | 1,113 |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Assets: | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 92 | $ | 2 | $ | 54,473 | $ | 11,926 | $ | — | $ | 66,493 | ||||||
Restricted cash | — | — | 2,472 | 153 | — | 2,625 | ||||||||||||
Accounts receivable | — | — | 12,386 | 3,559 | — | 15,945 | ||||||||||||
Prepaid domain name registry fees | — | — | 28,291 | 25,514 | — | 53,805 | ||||||||||||
Prepaid expenses & other current assets | (12 | ) | 86 | 20,062 | 9,191 | — | 29,327 | |||||||||||
Total current assets | 80 | 88 | 117,684 | 50,343 | — | 168,195 | ||||||||||||
Intercompany receivables, net | 33,637 | 606,834 | (498,213 | ) | (142,258 | ) | — | — | ||||||||||
Property and equipment, net | — | — | 81,693 | 13,759 | — | 95,452 | ||||||||||||
Goodwill | — | — | 1,673,851 | 176,731 | — | 1,850,582 | ||||||||||||
Other intangible assets, net | — | — | 450,778 | 4,662 | — | 455,440 | ||||||||||||
Investment in subsidiaries | 49,288 | 1,355,013 | 37,200 | — | (1,441,501 | ) | — | |||||||||||
Other assets | — | 3,639 | 21,373 | 6,405 | — | 31,417 | ||||||||||||
Total assets | $ | 83,005 | $ | 1,965,574 | $ | 1,884,366 | $ | 109,642 | $ | (1,441,501 | ) | $ | 2,601,086 | |||||
Liabilities and stockholders' equity: | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 9,532 | $ | 1,526 | $ | — | $ | 11,058 | ||||||
Accrued expenses and other current liabilities | — | 24,509 | 75,819 | 8,151 | — | 108,479 | ||||||||||||
Deferred revenue | — | — | 309,395 | 52,545 | — | 361,940 | ||||||||||||
Current portion of notes payable | — | 33,945 | — | — | — | 33,945 | ||||||||||||
Current portion of capital lease obligations | — | — | 7,630 | — | — | 7,630 | ||||||||||||
Deferred consideration, short-term | — | — | 4,365 | — | — | 4,365 | ||||||||||||
Total current liabilities | — | 58,454 | 406,741 | 62,222 | — | 527,417 | ||||||||||||
Deferred revenue, long-term | — | — | 81,199 | 9,773 | — | 90,972 | ||||||||||||
Notes payable | — | 1,858,300 | — | — | — | 1,858,300 | ||||||||||||
Capital lease obligations | — | — | 7,719 | — | — | 7,719 | ||||||||||||
Deferred consideration | — | — | 3,551 | — | — | 3,551 | ||||||||||||
Other long-term liabilities | — | (468 | ) | 30,143 | 447 | — | 30,122 | |||||||||||
Total liabilities | — | 1,916,286 | 529,353 | 72,442 | — | 2,518,081 | ||||||||||||
Equity | 83,005 | 49,288 | 1,355,013 | 37,200 | (1,441,501 | ) | 83,005 | |||||||||||
Total liabilities and stockholders' equity | $ | 83,005 | $ | 1,965,574 | $ | 1,884,366 | $ | 109,642 | $ | (1,441,501 | ) | $ | 2,601,086 |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Assets: | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 207 | $ | 2 | $ | 59,890 | $ | 29,575 | $ | — | $ | 89,674 | ||||||
Restricted cash | — | — | 1,731 | 101 | — | 1,832 | ||||||||||||
Accounts receivable | — | — | 11,906 | 2,199 | — | 14,105 | ||||||||||||
Prepaid domain name registry fees | — | — | 32,729 | 24,385 | — | 57,114 | ||||||||||||
Prepaid commissions | — | — | 41,085 | 659 | — | 41,744 | ||||||||||||
Prepaid expenses & other current assets | — | 174 | 18,361 | 8,566 | — | 27,101 | ||||||||||||
Total current assets | 207 | 176 | 165,702 | 65,485 | — | 231,570 | ||||||||||||
Intercompany receivables, net | 34,278 | 441,001 | (354,298 | ) | (120,981 | ) | — | — | ||||||||||
Property and equipment, net | — | — | 66,772 | 12,543 | — | 79,315 | ||||||||||||
Goodwill | — | — | 1,673,851 | 175,413 | — | 1,849,264 | ||||||||||||
Other intangible assets, net | — | — | 376,441 | 1,229 | — | 377,670 | ||||||||||||
Investment in subsidiaries | 122,114 | 1,510,592 | 74,478 | — | (1,707,184 | ) | — | |||||||||||
Prepaid commissions, net of current portion | — | — | 41,346 | 735 | — | 42,081 | ||||||||||||
Other assets | — | 9,742 | 22,351 | 6,410 | — | 38,503 | ||||||||||||
Total assets | $ | 156,599 | $ | 1,961,511 | $ | 2,066,643 | $ | 140,834 | $ | (1,707,184 | ) | $ | 2,618,403 | |||||
Liabilities and stockholders' equity: | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 10,239 | $ | 573 | $ | — | $ | 10,812 | ||||||
Accrued expenses and other current liabilities | — | 15,197 | 69,493 | 4,376 | — | 89,066 | ||||||||||||
Deferred revenue | — | — | 330,178 | 50,386 | — | 380,564 | ||||||||||||
Current portion of notes payable | — | 31,606 | — | — | — | 31,606 | ||||||||||||
Current portion of capital lease obligations | — | — | 7,595 | — | — | 7,595 | ||||||||||||
Deferred consideration, short-term | — | — | 2,386 | — | — | 2,386 | ||||||||||||
Total current liabilities | — | 46,803 | 419,891 | 55,335 | — | 522,029 | ||||||||||||
Deferred revenue, long-term | — | — | 86,133 | 10,286 | — | 96,419 | ||||||||||||
Notes payable | — | 1,792,436 | — | — | — | 1,792,436 | ||||||||||||
Capital lease obligations | — | — | 2,067 | — | — | 2,067 | ||||||||||||
Deferred consideration | — | — | 1,342 | — | — | 1,342 | ||||||||||||
Other long-term liabilities | — | 158 | 46,618 | 736 | — | 47,512 | ||||||||||||
Total liabilities | — | 1,839,397 | 556,051 | 66,357 | — | 2,461,805 | ||||||||||||
Equity | 156,599 | 122,114 | 1,510,592 | 74,477 | (1,707,184 | ) | 156,598 | |||||||||||
Total liabilities and stockholders' equity | $ | 156,599 | $ | 1,961,511 | $ | 2,066,643 | $ | 140,834 | $ | (1,707,184 | ) | $ | 2,618,403 |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenue | $ | — | $ | — | $ | 266,985 | $ | 30,019 | $ | (1,782 | ) | $ | 295,222 | |||||
Cost of revenue | — | — | 139,044 | 21,155 | (1,334 | ) | 158,865 | |||||||||||
Gross profit | — | — | 127,941 | 8,864 | (448 | ) | 136,357 | |||||||||||
Operating expense: | ||||||||||||||||||
Sales and marketing | — | — | 61,376 | 4,900 | — | 66,276 | ||||||||||||
Engineering and development | — | — | 17,412 | 2,470 | — | 19,882 | ||||||||||||
General and administrative | — | 56 | 50,353 | 1,465 | (605 | ) | 51,269 | |||||||||||
Total operating expense | — | 56 | 129,141 | 8,835 | (605 | ) | 137,427 | |||||||||||
(Loss) income from operations | — | (56 | ) | (1,200 | ) | 29 | 157 | (1,070 | ) | |||||||||
Interest expense and other income, net | — | 35,661 | 756 | (172 | ) | — | 36,245 | |||||||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | — | (35,717 | ) | (1,956 | ) | 201 | 157 | (37,315 | ) | |||||||||
Income tax (benefit) expense | — | (13,201 | ) | 15,494 | 689 | — | 2,982 | |||||||||||
(Loss) income before equity earnings of unconsolidated entities | — | (22,516 | ) | (17,450 | ) | (488 | ) | 157 | (40,297 | ) | ||||||||
Equity loss (income) of unconsolidated entities, net of tax | 40,422 | 17,906 | 456 | — | (58,817 | ) | (33 | ) | ||||||||||
Net (loss) income | $ | (40,422 | ) | $ | (40,422 | ) | $ | (17,906 | ) | $ | (488 | ) | $ | 58,974 | $ | (40,264 | ) | |
Net (loss) income attributable to Endurance International Group Holdings, Inc. | $ | (40,422 | ) | $ | (40,422 | ) | $ | (17,906 | ) | $ | (488 | ) | $ | 58,974 | $ | (40,264 | ) | |
Comprehensive income (loss): | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 1,070 | — | 1,070 | ||||||||||||
Unrealized gain on cash flow hedge, net of taxes | — | 83 | — | — | — | 83 | ||||||||||||
Total comprehensive (loss) income | $ | (40,422 | ) | $ | (40,339 | ) | $ | (17,906 | ) | $ | 582 | $ | 58,974 | $ | (39,111 | ) |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenue | $ | — | $ | — | $ | 788,806 | $ | 98,321 | $ | (4,510 | ) | $ | 882,617 | |||||
Cost of revenue | — | — | 392,447 | 65,392 | (3,642 | ) | 454,197 | |||||||||||
Gross profit | — | — | 396,359 | 32,929 | (868 | ) | 428,420 | |||||||||||
Operating expense: | ||||||||||||||||||
Sales and marketing | — | — | 195,392 | 15,765 | (3 | ) | 211,154 | |||||||||||
Engineering and development | — | — | 51,053 | 9,340 | — | 60,393 | ||||||||||||
General and administrative | — | 166 | 123,736 | 7,632 | (605 | ) | 130,929 | |||||||||||
Transaction costs | — | — | 773 | — | — | 773 | ||||||||||||
Total operating expense | — | 166 | 370,954 | 32,737 | (608 | ) | 403,249 | |||||||||||
(Loss) income from operations | — | (166 | ) | 25,405 | 192 | (260 | ) | 25,171 | ||||||||||
Interest expense and other income, net | — | 120,313 | 1,150 | (347 | ) | — | 121,116 | |||||||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | — | (120,479 | ) | 24,255 | 539 | (260 | ) | (95,945 | ) | |||||||||
Income tax (benefit) expense | — | (44,512 | ) | 54,744 | 1,152 | — | 11,384 | |||||||||||
(Loss) income before equity earnings of unconsolidated entities | — | (75,967 | ) | (30,489 | ) | (613 | ) | (260 | ) | (107,329 | ) | |||||||
Equity loss (income) of unconsolidated entities, net of tax | 106,999 | 31,033 | 543 | — | (138,647 | ) | (72 | ) | ||||||||||
Net (loss) income | $ | (106,999 | ) | $ | (107,000 | ) | $ | (31,032 | ) | $ | (613 | ) | $ | 138,387 | $ | (107,257 | ) | |
Net loss attributable to non-controlling interest | — | — | 7,524 | — | — | 7,524 | ||||||||||||
Net (loss) income attributable to Endurance International Group Holdings, Inc. | $ | (106,999 | ) | $ | (107,000 | ) | $ | (38,556 | ) | $ | (613 | ) | $ | 138,387 | $ | (114,781 | ) | |
Comprehensive income (loss): | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 2,984 | — | 2,984 | ||||||||||||
Unrealized gain on cash flow hedge, net of taxes | — | (309 | ) | — | — | — | (309 | ) | ||||||||||
Total comprehensive (loss) income | $ | (106,999 | ) | $ | (107,309 | ) | $ | (38,556 | ) | $ | 2,371 | $ | 138,387 | $ | (112,106 | ) |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenue | $ | — | $ | — | $ | 258,388 | $ | 26,730 | $ | (1,348 | ) | $ | 283,770 | |||||
Cost of revenue | — | — | 110,808 | 19,485 | (1,348 | ) | 128,945 | |||||||||||
Gross profit | — | — | 147,580 | 7,245 | — | 154,825 | ||||||||||||
Operating expense: | ||||||||||||||||||
Sales and marketing | — | — | 60,341 | 3,490 | — | 63,831 | ||||||||||||
Engineering and development | — | — | 20,524 | 2,159 | — | 22,683 | ||||||||||||
General and administrative | (11 | ) | 52 | 24,187 | 1,465 | — | 25,693 | |||||||||||
Total operating expense | (11 | ) | 52 | 105,052 | 7,114 | — | 112,207 | |||||||||||
(Loss) income from operations | 11 | (52 | ) | 42,528 | 131 | — | 42,618 | |||||||||||
Interest expense and other income, net | — | 37,305 | 74 | (141 | ) | — | 37,238 | |||||||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | 11 | (37,357 | ) | 42,454 | 272 | — | 5,380 | |||||||||||
Income tax (benefit) expense | — | (8,891 | ) | 22,020 | (1,414 | ) | — | 11,715 | ||||||||||
(Loss) income before equity earnings of unconsolidated entities | 11 | (28,466 | ) | 20,434 | 1,686 | — | (6,335 | ) | ||||||||||
Equity loss (income) of unconsolidated entities, net of tax | 6,346 | (22,120 | ) | (1,686 | ) | — | 17,460 | — | ||||||||||
Net (loss) income | $ | (6,335 | ) | $ | (6,346 | ) | $ | 22,120 | $ | 1,686 | $ | (17,460 | ) | $ | (6,335 | ) | ||
Net (loss) income attributable to Endurance International Group Holdings, Inc. | $ | (6,335 | ) | $ | (6,346 | ) | $ | 22,120 | $ | 1,686 | $ | (17,460 | ) | $ | (6,335 | ) | ||
Comprehensive income (loss): | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (644 | ) | — | (644 | ) | ||||||||||
Unrealized gain on cash flow hedge, net of taxes | — | 812 | — | — | — | 812 | ||||||||||||
Total comprehensive (loss) income | $ | (6,335 | ) | $ | (5,534 | ) | $ | 22,120 | $ | 1,042 | $ | (17,460 | ) | $ | (6,167 | ) |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Revenue | $ | — | $ | — | $ | 783,611 | $ | 83,995 | $ | (4,710 | ) | $ | 862,896 | |||||
Cost of revenue | — | — | 338,885 | 59,422 | (4,710 | ) | 393,597 | |||||||||||
Gross profit | — | — | 444,726 | 24,573 | — | 469,299 | ||||||||||||
Operating expense: | ||||||||||||||||||
Sales and marketing | — | — | 187,175 | 10,558 | — | 197,733 | ||||||||||||
Engineering and development | — | — | 58,850 | 5,709 | — | 64,559 | ||||||||||||
General and administrative | (11 | ) | 169 | 124,317 | (29,263 | ) | — | 95,212 | ||||||||||
Total operating expense | (11 | ) | 169 | 370,342 | (12,996 | ) | — | 357,504 | ||||||||||
(Loss) income from operations | 11 | (169 | ) | 74,384 | 37,569 | — | 111,795 | |||||||||||
Interest expense and other income, net | — | 111,051 | 539 | (387 | ) | — | 111,203 | |||||||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | 11 | (111,220 | ) | 73,845 | 37,956 | — | 592 | |||||||||||
Income tax (benefit) expense | — | (26,470 | ) | 35,897 | (601 | ) | — | 8,826 | ||||||||||
(Loss) income before equity earnings of unconsolidated entities | 11 | (84,750 | ) | 37,948 | 38,557 | — | (8,234 | ) | ||||||||||
Equity loss (income) of unconsolidated entities, net of tax | 8,247 | (76,503 | ) | (38,554 | ) | 18 | 106,794 | 2 | ||||||||||
Net (loss) income | $ | (8,236 | ) | $ | (8,247 | ) | $ | 76,502 | $ | 38,539 | $ | (106,794 | ) | $ | (8,236 | ) | ||
Net (loss) income attributable to Endurance International Group Holdings, Inc. | $ | (8,236 | ) | $ | (8,247 | ) | $ | 76,502 | $ | 38,539 | $ | (106,794 | ) | $ | (8,236 | ) | ||
Comprehensive income (loss): | ||||||||||||||||||
Foreign currency translation adjustments | — | — | — | (2,489 | ) | — | (2,489 | ) | ||||||||||
Unrealized gain on cash flow hedge, net of taxes | — | 1,996 | — | — | — | 1,996 | ||||||||||||
Total comprehensive (loss) income | $ | (8,236 | ) | $ | (6,251 | ) | $ | 76,502 | $ | 36,050 | $ | (106,794 | ) | $ | (8,729 | ) |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Net cash (used in) provided by operating activities | $ | (32 | ) | $ | (72,687 | ) | $ | 204,768 | $ | (3,183 | ) | $ | — | $ | 128,866 | |||
Cash flows from investing activities: | ||||||||||||||||||
Purchases of property and equipment | — | — | (28,140 | ) | (3,955 | ) | — | (32,095 | ) | |||||||||
Proceeds from sale of property and equipment | — | — | 292 | — | — | 292 | ||||||||||||
Proceeds from note receivable | — | — | — | — | — | — | ||||||||||||
Purchases of intangible assets | — | — | (1,932 | ) | (34 | ) | — | (1,966 | ) | |||||||||
Net cash used in investing activities | — | — | (29,780 | ) | (3,989 | ) | — | (33,769 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||||
Proceeds from issuance of notes payable and draws on revolver | — | 1,693,007 | — | — | — | 1,693,007 | ||||||||||||
Repayment of notes payable and revolver | — | (1,733,147 | ) | — | — | — | (1,733,147 | ) | ||||||||||
Payment of financing costs | — | (6,304 | ) | — | — | — | (6,304 | ) | ||||||||||
Payment of deferred consideration | — | — | (4,550 | ) | (858 | ) | — | (5,408 | ) | |||||||||
Payment of redeemable non-controlling interest liability | — | — | (25,000 | ) | — | — | (25,000 | ) | ||||||||||
Principal payments on capital lease obligations | — | — | (5,679 | ) | — | — | (5,679 | ) | ||||||||||
Proceeds from exercise of stock options | 1,548 | — | — | — | — | 1,548 | ||||||||||||
Intercompany loans and investments | (1,058 | ) | 119,128 | (124,060 | ) | 5,990 | — | — | ||||||||||
Net cash (used in) provided by financing activities | 490 | 72,684 | (159,289 | ) | 5,132 | — | (80,983 | ) | ||||||||||
Net effect of exchange rate on cash and cash equivalents and restricted cash | — | — | — | 2,156 | — | 2,156 | ||||||||||||
Net (decrease) increase in cash and cash equivalents and restricted cash | 458 | (3 | ) | 15,699 | 116 | — | 16,270 | |||||||||||
Cash and cash equivalents and restricted cash: | ||||||||||||||||||
Beginning of period | 3 | 4 | 41,654 | 15,237 | — | 56,898 | ||||||||||||
End of period | $ | 461 | $ | 1 | $ | 57,353 | $ | 15,353 | $ | — | $ | 73,168 |
Parent | Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | (88,464 | ) | $ | 180,852 | $ | 41,205 | $ | — | $ | 133,593 | |||||
Cash flows from investing activities: | ||||||||||||||||||
Purchases of property and equipment | — | — | (22,159 | ) | (184 | ) | — | (22,343 | ) | |||||||||
Proceeds from sale of property and equipment | — | — | 6 | — | — | 6 | ||||||||||||
Net cash used in investing activities | — | — | (22,153 | ) | (184 | ) | — | (22,337 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||||
Proceeds from issuance of term loan and notes, net of original issue discounts | — | 1,580,305 | — | — | — | 1,580,305 | ||||||||||||
Repayment of term loans | — | (1,656,094 | ) | — | — | — | (1,656,094 | ) | ||||||||||
Payment of financing costs | — | (1,580 | ) | — | — | — | (1,580 | ) | ||||||||||
Payment of deferred consideration | — | — | (4,500 | ) | — | — | (4,500 | ) | ||||||||||
Principal payments on capital lease obligations | — | — | (5,609 | ) | — | — | (5,609 | ) | ||||||||||
Proceeds from exercise of stock options | 756 | — | — | — | — | 756 | ||||||||||||
Intercompany loans and investments | (641 | ) | 165,833 | (143,914 | ) | (21,278 | ) | — | — | |||||||||
Net cash provided by (used in) financing activities | 115 | 88,464 | (154,023 | ) | (21,278 | ) | — | (86,722 | ) | |||||||||
Net effect of exchange rate on cash and cash equivalents and restricted cash | — | — | — | (2,146 | ) | — | (2,146 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents and restricted cash | 115 | — | 4,676 | 17,597 | — | 22,388 | ||||||||||||
Cash and cash equivalents and restricted cash: | ||||||||||||||||||
Beginning of period | 92 | 2 | 56,945 | 12,079 | — | 69,118 | ||||||||||||
End of period | $ | 207 | $ | 2 | $ | 61,621 | $ | 29,676 | $ | — | $ | 91,506 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Revenue | $ | 295,222 | $ | 283,770 | $ | 882,617 | $ | 862,896 | |||||||
Net loss | $ | (40,264 | ) | $ | (6,335 | ) | $ | (107,257 | ) | $ | (8,236 | ) | |||
Net cash provided by operating activities | $ | 46,444 | $ | 51,341 | $ | 128,866 | $ | 133,593 |
• | Revenue decreased by 4% as compared to the three months ended September 30, 2017 primarily due to revenue declines in the web presence and domain segments. These declines were partially offset by a slight increase in email marketing segment revenue. |
• | Net loss decreased from $40.3 million for the three months ended September 30, 2017 to $6.3 million for the three months ended September 30, 2018, due primarily to decreases in impairment charges, lower stock-based compensation expense, lower amortization expense, lower charges for litigation related matters, lower restructuring charges, and lower cost of revenue. These decreases in net loss were partially offset by lower revenue and increased income tax expense. |
• | Net cash provided by operating activities during the three months ended September 30, 2018 increased by 11% as compared to net cash provided by operating activities during the three months ended September 30, 2017. The increase was primarily due to improved working capital, mainly due to timing of vendor payments and lower payments for restructuring. These improvements in working capital were partially offset by lower revenue and lower subscriber billings, which led to a lower increase in deferred revenue. |
• | Revenue decreased by 2% as compared to the nine months ended September 30, 2017 primarily due to revenue declines in the web presence segment and to a lesser extent, in the domain segment. This decline was partially offset by an increase in email marketing segment revenue. |
• | Net loss decreased from $107.3 million for the nine months ended September 30, 2017 to $8.2 million for the nine months ended September 30, 2018, due primarily to decreases in stock-based compensation expense, amortization expense, impairment charges, restructuring charges, net interest expense, depreciation expense and income tax expense, lower cost of revenue and lower operating expense, all of which were partially offset by lower revenue. |
• | Net cash provided by operating activities during the nine months ended September 30, 2018 increased by 4% as compared to net cash provided by operating activities during the nine months ended September 30, 2017. The increase was primarily due to improved working capital, mainly due to timing of vendor payments, lower payments for restructuring and reduced interest payments. These improvements in working capital were partially offset by lower revenue; lower subscriber billings, which led to a lower increase in deferred revenue; payments related to our SEC investigation settlement; and the purchase of an interest rate cap to manage interest rate risk on our term loan. |
• | total subscribers; |
• | average revenue per subscriber (“ARPS”); |
• | adjusted EBITDA; and |
• | free cash flow. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Consolidated metrics: | |||||||||||||||
Total subscribers | 5,122 | 4,852 | 5,122 | 4,852 | |||||||||||
Average subscribers for the period | 5,170 | 4,885 | 5,247 | 4,951 | |||||||||||
ARPS | $ | 19.03 | $ | 19.36 | $ | 18.69 | $ | 19.36 | |||||||
Adjusted EBITDA | $ | 93,765 | $ | 87,496 | $ | 256,412 | $ | 258,716 | |||||||
Web presence segment metrics: | |||||||||||||||
Total subscribers | 3,957 | 3,682 | 3,957 | 3,682 | |||||||||||
Average subscribers for the period | 3,999 | 3,709 | 4,079 | 3,765 | |||||||||||
ARPS | $ | 13.30 | $ | 13.47 | $ | 13.18 | $ | 13.50 | |||||||
Adjusted EBITDA | $ | 43,232 | $ | 37,900 | $ | 119,946 | $ | 112,997 | |||||||
Email marketing segment metrics: | |||||||||||||||
Total subscribers | 523 | 499 | 523 | 499 | |||||||||||
Average subscribers for the period | 527 | 502 | 533 | 509 | |||||||||||
ARPS | $ | 64.26 | $ | 67.88 | $ | 62.16 | $ | 66.97 | |||||||
Adjusted EBITDA | $ | 51,143 | $ | 48,438 | $ | 135,353 | $ | 139,422 | |||||||
Domain segment metrics: | |||||||||||||||
Total subscribers | 642 | 671 | 642 | 671 | |||||||||||
Average subscribers for the period | 644 | 674 | 635 | 677 | |||||||||||
ARPS | $ | 17.68 | $ | 15.71 | $ | 17.59 | $ | 16.18 | |||||||
Adjusted EBITDA | $ | (610 | ) | $ | 1,158 | $ | 1,113 | $ | 6,297 |
Web presence | Email marketing | Domain | Total | ||||||
# Subscribers | # Subscribers | # Subscribers | # Subscribers | ||||||
Total Subscribers - September 30, 2017 | 3,957 | 523 | 642 | 5,122 | |||||
Light web presence subscribers | 12 | — | (2 | ) | 10 | ||||
Adjustments | (39 | ) | — | 35 | (4 | ) | |||
Core subscriber decrease | (248 | ) | (24 | ) | (4 | ) | (276 | ) | |
Total Subscribers - September 30, 2018(1) | 3,682 | 499 | 671 | 4,852 |
(1) | Total email marketing subscriber count as of September 30, 2018 was impacted by a loss of approximately 10,500 subscribers, which resulted from changes made to Constant Contact’s account cancellation policy. These changes took place in the three months ended June 30, 2018, as previously disclosed. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Consolidated revenue | $ | 295,222 | $ | 283,770 | $882,617 | $862,896 | |||||||||
Consolidated total subscribers | 5,122 | 4,852 | 5,122 | 4,852 | |||||||||||
Consolidated average subscribers for the period | 5,170 | 4,885 | 5,247 | 4,951 | |||||||||||
Consolidated ARPS | $ | 19.03 | $ | 19.36 | $ | 18.69 | $ | 19.36 | |||||||
Web presence revenue | $ | 159,530 | $ | 149,871 | $ | 483,661 | $ | 457,603 | |||||||
Web presence subscribers | 3,957 | 3,682 | 3,957 | 3,682 | |||||||||||
Web presence average subscribers for the period | 3,999 | 3,709 | 4,079 | 3,765 | |||||||||||
Web presence ARPS | $ | 13.30 | $ | 13.47 | $ | 13.18 | $ | 13.50 | |||||||
Email marketing revenue | $ | 101,526 | $ | 102,111 | $ | 298,401 | $ | 306,712 | |||||||
Email marketing subscribers(1) | 523 | 499 | 523 | 499 | |||||||||||
Email marketing average subscribers for the period | 527 | 502 | 533 | 509 | |||||||||||
Email marketing ARPS | $ | 64.26 | $ | 67.88 | $ | 62.16 | $ | 66.97 | |||||||
Domain revenue | $ | 34,166 | $ | 31,788 | $ | 100,555 | $ | 98,581 | |||||||
Domain subscribers | 642 | 671 | 642 | 671 | |||||||||||
Domain average subscribers for the period | 644 | 674 | 635 | 677 | |||||||||||
Domain ARPS | $ | 17.68 | $ | 15.71 | $ | 17.59 | $ | 16.18 |
(1) | Total email marketing subscriber count as of September 30, 2018 was impacted by a loss of approximately 10,500 subscribers, which resulted from changes made to Constant Contact’s account cancellation policy. These changes took place in the three months ended June 30, 2018, as previously disclosed. |
• | Revenue from domain-only customers. Our web presence and domain segments each earn revenue from domain-only customers. For our web presence segment, approximately 1% of our revenue for the nine months ended September 30, 2018 was earned from domain-only customers. For our domain segment, approximately 6% of our revenue for the nine months ended September 30, 2018 was earned from domain-only customers. |
• | Domain monetization revenue. This consists principally of revenue from our BuyDomains brand, which provides premium domain name products and services, and, to a lesser extent, revenue from advertisements placed on unused domains (often referred to as “parked” pages) owned by us or our customers. A significant portion of this revenue is associated with our domain segment. |
• | Revenue from marketing development funds. Marketing development funds are the amounts that certain of our partners pay us to assist in and incentivize our marketing of their products. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Consolidated | |||||||||||||||
Marketing development fund revenue | $ | 2,753 | $ | 2,592 | $ | 8,696 | $ | 6,949 | |||||||
Marketing development funds - contribution to ARPS | $ | 0.17 | $ | 0.18 | $ | 0.18 | $ | 0.16 | |||||||
Domain monetization revenue | $ | 7,120 | $ | 6,112 | $ | 20,722 | $ | 20,178 | |||||||
Domain monetization revenue - contribution to ARPS | $ | 0.45 | $ | 0.42 | $ | 0.44 | $ | 0.45 | |||||||
Web presence | |||||||||||||||
Marketing development fund revenue | $ | 1,981 | $ | 2,199 | $ | 5,872 | $ | 6,011 | |||||||
Marketing development funds - contribution to ARPS | $ | 0.16 | $ | 0.20 | $ | 0.16 | $ | 0.18 | |||||||
Domain monetization revenue | $ | — | $ | 175 | $ | 16 | $ | 692 | |||||||
Domain monetization revenue - contribution to ARPS | $ | — | $ | 0.02 | $ | — | $ | 0.02 | |||||||
Email marketing | |||||||||||||||
Marketing development fund revenue | $ | 772 | $ | 141 | $ | 2,304 | $ | 464 | |||||||
Marketing development funds - contribution to ARPS | $ | 0.49 | $ | 0.09 | $ | 0.48 | $ | 0.10 | |||||||
Domain | |||||||||||||||
Marketing development fund revenue | $ | — | $ | 252 | $ | 520 | $ | 474 | |||||||
Marketing development funds - contribution to ARPS | $ | — | $ | 0.12 | $ | 0.09 | $ | 0.08 | |||||||
Domain monetization revenue | $ | 7,120 | $ | 5,937 | $ | 20,706 | $ | 19,486 | |||||||
Domain monetization revenue - contribution to ARPS | $ | 3.71 | $ | 2.93 | $ | 3.61 | $ | 3.20 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Consolidated | |||||||||||||||
Net loss | $ | (40,264 | ) | $ | (6,335 | ) | $ | (107,257 | ) | $ | (8,236 | ) | |||
Interest expense, net(1) | 35,645 | 37,238 | 120,516 | 111,203 | |||||||||||
Income tax expense | 2,982 | 11,715 | 11,384 | 8,826 | |||||||||||
Depreciation | 13,571 | 11,889 | 40,733 | 36,753 | |||||||||||
Amortization of other intangible assets | 35,347 | 26,177 | 104,554 | 77,890 | |||||||||||
Stock-based compensation | 19,580 | 7,550 | 48,749 | 21,932 | |||||||||||
Restructuring expenses | 4,489 | 197 | 14,584 | 3,021 | |||||||||||
Transaction expenses and charges | — | — | 773 | — | |||||||||||
(Gain) loss of unconsolidated entities | (33 | ) | — | (72 | ) | 2 | |||||||||
Impairment of other long-lived assets | 14,448 | — | 14,448 | — | |||||||||||
SEC investigations reserve | 8,000 | — | 8,000 | — |
Shareholder litigation reserve | — | (935 | ) | — | 7,325 | ||||||||||
Adjusted EBITDA | $ | 93,765 | $ | 87,496 | $ | 256,412 | $ | 258,716 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 (2) | 2018 | 2017 | 2018 | ||||||||||||
Web presence | |||||||||||||||
Net loss | $ | (20,403 | ) | $ | (7,565 | ) | $ | (67,226 | ) | $ | (20,549 | ) | |||
Interest expense, net(1) | 14,686 | 18,132 | 50,877 | 53,503 | |||||||||||
Income tax expense | 798 | 6,136 | 12,645 | 960 | |||||||||||
Depreciation | 9,399 | 8,401 | 27,401 | 24,769 | |||||||||||
Amortization of other intangible assets | 14,884 | 11,941 | 44,431 | 35,812 | |||||||||||
Stock-based compensation | 15,510 | 1,569 | 38,023 | 12,066 | |||||||||||
Restructuring expenses | 3,468 | 54 | 8,944 | 1,654 | |||||||||||
Transaction expenses and charges | — | — | — | — | |||||||||||
(Gain) loss of unconsolidated entities | (33 | ) | — | (72 | ) | 2 | |||||||||
Impairment of other long-lived assets | 600 | — | 600 | — | |||||||||||
SEC investigations reserve | 4,323 | — | 4,323 | — | |||||||||||
Shareholder litigation reserve | — | (768 | ) | — | 4,780 | ||||||||||
Adjusted EBITDA | $ | 43,232 | $ | 37,900 | $ | 119,946 | $ | 112,997 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Email marketing | |||||||||||||||
Net (loss) income | $ | 2,202 | $ | 6,596 | $ | (8,026 | ) | $ | 22,350 | ||||||
Interest expense, net(1) | 20,514 | 17,128 | 68,212 | 50,866 | |||||||||||
Income tax expense (benefit) | 1,323 | 4,179 | (4,821 | ) | 8,009 | ||||||||||
Depreciation | 3,233 | 2,538 | 10,632 | 9,090 | |||||||||||
Amortization of other intangible assets | 18,770 | 13,384 | 55,697 | 39,716 | |||||||||||
Stock-based compensation | 1,668 | 4,472 | 5,392 | 7,168 | |||||||||||
Restructuring expenses | 682 | 141 | 4,743 | 723 | |||||||||||
Transaction expenses and charges | — | — | 773 | — | |||||||||||
(Gain) loss of unconsolidated entities | — | — | — | — | |||||||||||
Impairment of other long-lived assets | — | — | — | — | |||||||||||
SEC investigations reserve | 2,751 | — | 2,751 | — | |||||||||||
Shareholder litigation reserve | — | — | — | 1,500 | |||||||||||
Adjusted EBITDA | $ | 51,143 | $ | 48,438 | $ | 135,353 | $ | 139,422 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 (2) | 2018 | 2017 | 2018 | ||||||||||||
Domain | |||||||||||||||
Net loss | $ | (22,063 | ) | $ | (5,366 | ) | $ | (32,005 | ) | $ | (10,037 | ) | |||
Interest expense, net(1) | 445 | 1,978 | 1,427 | 6,834 | |||||||||||
Income tax expense (benefit) | 861 | 1,400 | 3,560 | (143 | ) | ||||||||||
Depreciation | 939 | 950 | 2,700 | 2,894 | |||||||||||
Amortization of other intangible assets | 1,693 | 852 | 4,426 | 2,362 | |||||||||||
Stock-based compensation | 2,402 | 1,509 | 5,334 | 2,698 | |||||||||||
Restructuring expenses | 339 | 2 | 897 | 644 | |||||||||||
Transaction expenses and charges | — | — | — | — |
(Gain) loss of unconsolidated entities | — | — | — | — | |||||||||||
Impairment of other long-lived assets | 13,848 | — | 13,848 | — | |||||||||||
SEC investigations reserve | 926 | — | 926 | — | |||||||||||
Shareholder litigation reserve | — | (167 | ) | — | 1,045 | ||||||||||
Adjusted EBITDA | $ | (610 | ) | $ | 1,158 | $ | 1,113 | $ | 6,297 |
(1) | Interest expense includes impact of amortization of deferred financing costs, original issuance discounts ("OID") and interest income. |
(2) | Net income (loss) and adjusted EBITDA for the web presence and domain segments were revised to reflect a correction of a misstatement which overstated net loss and adjusted EBITDA for the domain segment by $1.9 million and $4.9 million for the three and nine months ended September 30, 2017, respectively, and understated the web presence net loss and adjusted EBITDA by an equal amount. Please see Note 21 of the consolidated financial statements for further details regarding the revision. |
• | revenue recognition, |
• | goodwill, |
• | long-lived assets, |
• | business combinations, |
• | derivative instruments, |
• | depreciation and amortization, |
• | income taxes, |
• | stock-based compensation arrangements, and |
• | segment information. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Revenue | $ | 295,222 | $ | 283,770 | $ | 882,617 | $ | 862,896 | |||||||
Cost of revenue | 158,865 | 128,945 | 454,197 | 393,597 | |||||||||||
Gross profit | 136,357 | 154,825 | 428,420 | 469,299 | |||||||||||
Operating expense: | |||||||||||||||
Sales and marketing | 66,276 | 63,831 | 211,154 | 197,733 | |||||||||||
Engineering and development | 19,882 | 22,683 | 60,393 | 64,559 | |||||||||||
General and administrative | 51,269 | 25,693 | 130,929 | 95,212 | |||||||||||
Transaction expenses | — | — | 773 | — | |||||||||||
Total operating expense | 137,427 | 112,207 | 403,249 | 357,504 | |||||||||||
Income from operations | (1,070 | ) | 42,618 | 25,171 | 111,795 | ||||||||||
Other income (expense): | |||||||||||||||
Other income (expense) | (600 | ) | — | (600 | ) | — | |||||||||
Interest income | 203 | 289 | 506 | 720 | |||||||||||
Interest expense | (35,848 | ) | (37,527 | ) | (121,022 | ) | (111,923 | ) | |||||||
Total other expense—net | (36,245 | ) | (37,238 | ) | (121,116 | ) | (111,203 | ) | |||||||
(Loss) income before income taxes and equity earnings of unconsolidated entities | (37,315 | ) | 5,380 | (95,945 | ) | 592 | |||||||||
Income tax expense | 2,982 | 11,715 | 11,384 | 8,826 | |||||||||||
Loss before equity earnings of unconsolidated entities | (40,297 | ) | (6,335 | ) | (107,329 | ) | (8,234 | ) | |||||||
Equity (income) loss of unconsolidated entities, net of tax | (33 | ) | — | (72 | ) | 2 | |||||||||
Net loss | $ | (40,264 | ) | $ | (6,335 | ) | $ | (107,257 | ) | $ | (8,236 | ) | |||
Total net loss attributable to non-controlling interest | — | — | 7,524 | — | |||||||||||
Net loss attributable to Endurance International Group Holdings, Inc. | $ | (40,264 | ) | $ | (6,335 | ) | $ | (114,781 | ) | $ | (8,236 | ) |
Three Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Revenue | $ | 295,222 | $ | 283,770 | $ | (11,452 | ) | (4 | )% |
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Cost of revenue | $ | 158,865 | 54 | % | $ | 128,945 | 45 | % | $ | (29,920 | ) | (19 | )% |
Three Months Ended September 30, | |||||||
2017 | 2018 | ||||||
(in thousands) | |||||||
Amortization expense | $ | 35,347 | $ | 26,177 | |||
Depreciation expense | $ | 11,603 | $ | 10,433 | |||
Stock-based compensation expense | $ | 1,553 | $ | 828 | |||
Impairment charges | $ | 13,848 | — |
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Gross profit | $ | 136,357 | 46 | % | $ | 154,825 | 55 | % | $ | 18,468 | 14 | % |
Three Months Ended September 30, | |||||||
2017 | 2018 | ||||||
(dollars in thousands) | |||||||
Revenue | $ | 295,222 | $ | 283,770 | |||
Gross profit | $ | 136,357 | $ | 154,825 | |||
Gross profit as % of revenue | 46 | % | 55 | % | |||
Amortization expense as % of revenue | 12 | % | 9 | % | |||
Depreciation expense as % of revenue | 4 | % | 4 | % | |||
Impairment charges | 5 | % | — | % | |||
Stock-based compensation expense as % of revenue | * | * |
* | Less than 1%. |
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Sales and marketing | $ | 66,276 | 22 | % | $ | 63,831 | 22 | % | $ | (2,445 | ) | (4 | )% | |||||||
Engineering and development | 19,882 | 7 | % | 22,683 | 8 | % | 2,801 | 14 | % | |||||||||||
General and administrative | 51,269 | 17 | % | 25,693 | 9 | % | (25,576 | ) | (50 | )% | ||||||||||
Transaction expenses | — | — | % | — | — | % | — | — | % | |||||||||||
Total | $ | 137,427 | 47 | % | $ | 112,207 | 40 | % | $ | (25,220 | ) | (18 | )% |
Three Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Other expense, net | $ | (36,245 | ) | $ | (37,238 | ) | $ | 993 | 3 | % |
Three Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Income tax expense | $ | 2,982 | $ | 11,715 | $ | 8,733 | 293 | % |
Nine Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Revenue | $ | 882,617 | $ | 862,896 | $ | (19,721 | ) | (2 | )% |
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Cost of revenue | $ | 454,197 | 51 | % | $ | 393,597 | 46 | % | $ | (60,600 | ) | (13 | )% |
Nine Months Ended September 30, | |||||||
2017 | 2018 | ||||||
(dollars in thousands) | |||||||
Amortization expense | $ | 104,554 | $ | 77,890 | |||
Depreciation expense | $ | 34,501 | $ | 32,448 | |||
Impairment charges | $ | 13,848 | $ | — | |||
Stock-based compensation expense | $ | 4,720 | $ | 3,223 |
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Gross profit | $ | 428,420 | 49 | % | $ | 469,299 | 54 | % | $ | 40,879 | 10 | % |
Nine Months Ended September 30, | |||||||
2017 | 2018 | ||||||
(dollars in thousands) | |||||||
Revenue | $ | 882,617 | $ | 862,896 | |||
Gross profit | $ | 428,420 | $ | 469,299 | |||
Gross profit % of revenue | 49 | % | 54 | % | |||
Amortization expense % of revenue | 12 | % | 9 | % | |||
Depreciation expense % of revenue | 4 | % | 4 | % | |||
Impairment charges % of revenue | 2 | % | — | % | |||
Stock-based compensation expense % of revenue | * | * |
* | Less than 1%. |
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2018 | Change | ||||||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | Amount | % | |||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Sales and marketing | $ | 211,154 | 24 | % | $ | 197,733 | 23 | % | $ | (13,421 | ) | (6 | )% | |||||||
Engineering and development | 60,393 | 7 | % | 64,559 | 7 | % | 4,166 | 7 | % | |||||||||||
General and administrative | 130,929 | 15 | % | 95,212 | 11 | % | (35,717 | ) | (27 | )% | ||||||||||
Transaction expense | 773 | — | % | — | — | % | (773 | ) | (100 | )% | ||||||||||
Total | $ | 403,249 | 46 | % | $ | 357,504 | 41 | % | $ | (45,745 | ) | (11 | )% |
Nine Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Other expense, net | $ | (121,116 | ) | $ | (111,203 | ) | $ | (9,913 | ) | (8 | )% |
Nine Months Ended September 30, | Change | |||||||||||||
2017 | 2018 | Amount | % | |||||||||||
(dollars in thousands) | ||||||||||||||
Income tax expense | $ | 11,384 | $ | 8,826 | $ | (2,558 | ) | (22 | )% |
For the three months ended, | |||||||||||||||||||
December 31, 2017 | March 31, 2018 | June 30, 2018 | September 30, 2018 | TTM | |||||||||||||||
(in thousands except ratios) | |||||||||||||||||||
Net (loss) income | $ | 7,473 | $ | (2,528 | ) | $ | 627 | $ | (6,335 | ) | $ | (763 | ) | ||||||
Interest expense | 36,119 | 36,050 | 38,346 | 37,527 | 148,042 | ||||||||||||||
Income tax expense (benefit) | (28,665 | ) | (1,943 | ) | (946 | ) | 11,715 | (19,839 | ) | ||||||||||
Depreciation | 14,451 | 12,068 | 12,796 | 11,889 | 51,204 | ||||||||||||||
Amortization of other intangible assets | 35,800 | 25,735 | 25,978 | 26,177 | 113,690 | ||||||||||||||
Stock-based compensation | 11,252 | 6,992 | 7,390 | 7,550 | 33,184 | ||||||||||||||
Integration and restructuring costs | 1,228 | 1,529 | 1,295 | 197 | 4,249 | ||||||||||||||
Transaction expenses and charges | — | — | — | — | — | ||||||||||||||
(Gain) loss of unconsolidated entities | (38 | ) | 27 | (25 | ) | — | (36 | ) | |||||||||||
Impairment of long-lived assets | 17,012 | — | — | — | 17,012 | ||||||||||||||
Gain on assets, not ordinary course | — | — | — | — | — | ||||||||||||||
Legal advisory and related expenses | 1,994 | 10,501 | 710 | (832 | ) | 12,373 | |||||||||||||
Billed revenue to GAAP revenue adjustment | (7,528 | ) | 11,098 | (2,431 | ) | (4,834 | ) | (3,695 | ) | ||||||||||
Adjustment for domain registration cost on a cash basis | 2,220 | (1,222 | ) | 1,258 | 1,299 | 3,555 | |||||||||||||
Currency translation | 19 | (6 | ) | (17 | ) | (17 | ) | (21 | ) | ||||||||||
Bank Adjusted EBITDA | $ | 91,337 | $ | 98,301 | $ | 84,981 | $ | 84,336 | $ | 358,955 | |||||||||
Current portion of notes payable | 31,606 | ||||||||||||||||||
Current portion of capital lease obligations | 7,595 | ||||||||||||||||||
Notes payable - long term | 1,792,436 | ||||||||||||||||||
Capital lease obligations - long term | 2,067 | ||||||||||||||||||
Original issue discounts and deferred financing costs | 55,960 | ||||||||||||||||||
Less: | |||||||||||||||||||
Unsecured notes | (350,000 | ) | |||||||||||||||||
Cash | (89,674 | ) | |||||||||||||||||
Certain permitted restricted cash | (101 | ) | |||||||||||||||||
Net senior secured indebtedness | $ | 1,449,889 | |||||||||||||||||
Net leverage ratio | 4.04 | ||||||||||||||||||
Maximum net leverage ratio | 6.00 |
Nine Months Ended September 30, | |||||||
2017 | 2018 | ||||||
(dollars in thousands) | |||||||
Purchases of property and equipment | $ | (32,095 | ) | $ | (22,343 | ) | |
Principal payments on capital lease obligations | $ | (5,679 | ) | $ | (5,609 | ) | |
Depreciation | $ | 40,733 | $ | 36,753 | |||
Amortization | $ | 113,252 | $ | 86,118 | |||
Cash flows provided by operating activities | $ | 128,866 | $ | 133,593 | |||
Cash flows used in investing activities | $ | (33,769 | ) | $ | (22,337 | ) | |
Cash flows used in financing activities | $ | (80,983 | ) | $ | (86,722 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Cash flow from operations | $ | 46,444 | $ | 51,341 | $ | 128,866 | $ | 133,593 | |||||||
Less: | |||||||||||||||
Capital expenditures and capital lease obligations(1) | (14,571 | ) | (10,662 | ) | (37,774 | ) | (27,952 | ) | |||||||
Free cash flow | $ | 31,873 | $ | 40,679 | $ | 91,092 | $ | 105,641 |
Payments due by period | |||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||
(in thousands) | |||||||||||||||
Long-term debt obligations: | |||||||||||||||
Principal payments on term loan facility and notes | $ | 1,880,002 | $ | 31,606 | $ | 63,212 | $ | 63,212 | $ | 1,721,972 | |||||
Total principal payments relating to our long-term debt obligations | $ | 1,880,002 | $ | 31,606 | $ | 63,212 | $ | 63,212 | $ | 1,721,972 |
• | our failure to develop or offer new or enhanced products and services in a timely manner that keeps pace with new technologies, competitor offerings and the evolving needs of our subscribers; |
• | difficulties providing or maintaining a high level of subscriber satisfaction, which could cause our existing subscribers to cancel their subscriptions or stop referring prospective subscribers to us; |
• | increases in our subscriber churn rates or our failure to convert subscribers from introductory, discounted products to full priced solutions; |
• | perceived or actual security, availability, integrity, privacy, reliability, quality or compatibility problems with our solutions, including related to unscheduled downtime, outages or network security breaches; |
• | our inability to maintain awareness of our brands, including due to fragmentation of our marketing efforts due to our historical approach of maintaining a portfolio of multiple brands rather than focusing our resources on a single brand or a few brands; |
• | continued or increased competition in the SMB market, including greater marketing efforts or investments by our competitors in advertising and promoting their brands or in product development; |
• | changes in search engine ranking algorithms or in search terms used by potential subscribers; or |
• | our inability to market our solutions in a cost-effective manner to new subscribers or to our existing subscribers due to changes in regulation, or changes in the enforcement of existing regulation, that would affect our marketing or pricing practices. |
• | our ability to cost-effectively attract, retain, and increase sales to subscribers; |
• | the impact of competition; |
• | the timing and success of introductions of new products or product enhancements; |
• | the amount and timing of our marketing expenditures; |
• | the amount and timing of capital expenditures or extraordinary expenses, such as litigation, regulatory or other dispute-related settlement payments (including, for example, any potential settlements of the pending legal proceedings described in Item 1 - Legal Proceedings); |
• | the mix of products we sell; |
• | higher than expected refunds to our subscribers; |
• | systems, data center and Internet failures, breaches and service interruptions; |
• | negative publicity about us or our brands; |
• | loss of key employees or difficulties recruiting new employees; |
• | the impact of changes in legislation or regulations, or to interpretations of existing legislation and regulations; |
• | litigation or governmental enforcement actions against us due to actual or alleged failures to comply with applicable laws or regulations; |
• | failures to comply with industry standards such as the payment card industry data security standards; |
• | changes in our effective tax rate, our misinterpretation of tax laws and regulations, or adverse outcomes from regulatory examinations of our income tax and other tax returns; |
• | interest rate fluctuations; |
• | goodwill and other intangible asset impairments; |
• | terminations of, disputes with, or material changes to our relationships with third-party partners; and |
• | costs, integration problems, or other liabilities associated with past or future acquisitions, strategic investments or joint ventures. |
• | adapting our solutions and marketing practices to international markets, including translation into foreign languages; |
• | compliance with foreign laws, including more stringent laws in foreign jurisdictions relating to consumer privacy and protection of data collected from individuals and other third parties; |
• | difficulties in collecting payments from subscribers or in automatically renewing their contracts with us, especially due to the more limited availability and popularity of credit cards in certain countries; |
• | greater difficulty in enforcing contracts, including our terms of service and other agreements; |
• | management, communication, compliance and integration problems resulting from cultural or language differences and geographic dispersion; |
• | sufficiency of qualified labor pools and greater influence of organized labor in various international markets; |
• | compliance by our employees, business partners and other agents with anti-bribery laws, economic sanction laws and regulations, export controls, and other U.S., foreign and local laws and regulations regarding international and multi-national business operations; |
• | potentially adverse tax consequences, including the complexities of foreign value added tax (or sales, service, use or other tax) systems, and our inadvertent failure to comply with all relevant foreign tax rules and regulations due to our lack of familiarity with the jurisdiction’s tax laws; |
• | restrictions and withholdings on the repatriation of earnings; |
• | foreign currency exchange risk; |
• | uncertain political, regulatory and economic climates in some countries, which could result in unpredictable or frequent changes in applicable regulations or in the general business environment that could negatively impact us; and |
• | reduced protection for intellectual property rights in some countries. |
• | difficulties or delays in integrating the acquired businesses, which could prevent us from realizing the anticipated benefits of acquisitions; |
• | reliance on third parties for transition services prior to subscriber migration; |
• | difficulties in supporting and migrating acquired subscribers, if any, to our platforms, which could cause subscriber churn, unanticipated costs and damage to our reputation; |
• | disruption of our ongoing business and diversion of management and other resources from existing operations; |
• | the incurrence of additional debt or the issuance of equity securities, resulting in dilution to existing stockholders, in order to fund an acquisition; |
• | assumption of debt or other actual or contingent liabilities of the acquired company, including litigation risk; |
• | differences in corporate culture, compliance protocols, and risk management practices between us and acquired companies; |
• | potential loss of an acquired business’ key employees; |
• | potential loss of the subscribers or partners of an acquired business due to the actual or perceived impact of the acquisition; |
• | difficulties associated with governance, management and control matters in majority or minority investments or joint ventures; |
• | unforeseen or undisclosed liabilities or challenges associated with the companies, businesses or technologies we acquire; |
• | adverse tax consequences, including exposure of our entire business to taxation in additional jurisdictions; and |
• | accounting effects, including potential impairment charges and requirements that we record deferred revenue at fair value. |
• | cease selling or using solutions that incorporate the intellectual property that our solutions allegedly infringe; |
• | make substantial payments for legal fees, settlement payments or other costs or damages; |
• | obtain a license or enter into a royalty agreement, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or redesign the allegedly infringing solutions to avoid infringement, which could be costly, time-consuming or impossible. |
• | The Digital Millennium Copyright Act of 1998, or DMCA, provides recourse for owners of copyrighted material who believe that their rights under U.S. copyright law have been infringed on the Internet. Under the DMCA, based on our current business activity as an online service provider that does not monitor, own or control website content posted by our subscribers, we generally are not liable for copyright infringing content posted by our subscribers or other third parties, provided that we follow the procedures for handling copyright infringement claims set forth in the DMCA. Generally, if we receive a proper notice from, or on behalf of, a copyright owner alleging infringement of copyrighted material located on websites we host, and we fail to expeditiously remove or disable access to the allegedly infringing material or otherwise fail to meet the requirements of the safe harbor provided by the DMCA, the copyright owner may seek to impose liability on us. We have in the past faced, and could in the future face, liability for copyright infringement due to technical mistakes in complying with the detailed DMCA take-down procedures. |
• | The Communications Decency Act of 1996, or CDA, generally protects interactive computer service providers such as us, from liability for certain online activities of their customers, such as the publication of defamatory or other objectionable content. As an interactive computer services provider, we do not monitor hosted websites or prescreen the content placed by our subscribers on their sites. Accordingly, under the CDA, we are generally not responsible for the subscriber-created content hosted on our servers. However, the CDA does not apply in foreign jurisdictions, and new or proposed legislation now or in the future, such as the recently enacted Allow States and Victims to Fight Online Sex Trafficking Act of 2017, or FOSTA, may reduce the immunity provided to us by the CDA. This could require us to develop or purchase tools that automatically screen for certain types of customer content, which would likely be expensive and time-consuming. Further, despite the CDA, we may nonetheless be brought into disputes between our subscribers and third parties which would require us to devote management time and resources to resolve such matters. We could also be the target of negative publicity about these types of disputes or about our hosting of websites or facilitating of email messages containing objectionable content (including, for example, alleged terrorist or racist content), particularly since there has recently been increasing pressure on companies providing social media platforms and other technology companies to screen for and remove these types of content. Such publicity could also have an adverse effect on our reputation and therefore our business. |
• | In addition to the CDA, the Securing the Protection of our Enduring and Established Constitutional Heritage Act, or the SPEECH Act, provides a statutory exception to the enforcement by a U.S. court of a foreign judgment that is less protective of free speech than the United States. Generally, the exception applies if the law applied in the foreign court did not provide at least as much protection for freedom of speech and press as would be provided by the First Amendment of the U.S. Constitution or by the constitution and law of the state in which the U.S. court is located, or if no finding of a violation would be supported under the First Amendment of the U.S. Constitution or under the constitution and law of the state in which the U.S. court is located. Although the SPEECH Act may protect us from the enforcement of foreign judgments in the United States, it does not affect the enforceability of the judgment in the foreign country that issued the judgment. Given our international presence, we may therefore, nonetheless, have to defend against or comply with any foreign judgments made against us, which could take up substantial management time and resources and damage our reputation. |
• | Liability for our failure to renew a subscriber’s domain or for our role in the wrongful transfer of control or ownership of accounts, websites or domain names; |
• | Liability for other forms of account, website or domain name “hijacking,” including misappropriation by third parties of subscriber accounts, websites or domain names; |
• | Liability for providing the identity and contact details of a domain name registrant who has purchased our domain privacy service, including in connection with the implementation of the GDPR compliance measures, even though our |
• | Liability for not providing such information where the underlying WHOIS information is no longer available due to GDPR compliance measures; |
• | Liability for trademark infringement if one or more domain names in our domain name portfolios that we own and provide for resale is alleged to violate another party’s trademark; and |
• | Liability for the infringement of third party trademarks or copyrights if advertisements displayed on websites associated with domains registered by us contain allegedly infringing content placed by third parties. |
• | making it more difficult for us to make payments on our indebtedness; |
• | increasing our vulnerability to general adverse financial, business, economic and industry conditions, as well as other factors that are beyond our control; |
• | requiring us to refinance, or resulting in our inability to refinance, all or a portion of our indebtedness at or before maturity, on favorable terms or at all, whether due to uncertain credit markets, our business performance, or other factors; |
• | requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, research and development efforts and other general corporate purposes; |
• | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and placing us at a disadvantage compared to our competitors that are less highly leveraged; |
• | restricting our ability to pay dividends on our capital stock or redeem, repurchase or retire our capital stock or indebtedness; |
• | limiting our ability to borrow additional funds; |
• | exposing us to the risk of increased interest rates as certain of our borrowings are, and may in the future be, at variable interest rates; |
• | requiring us to sell assets or incur additional indebtedness if we are not able to generate sufficient cash flow from operations to fund our liquidity needs; and |
• | making it more difficult for us to fund other liquidity needs. |
• | incur additional debt; |
• | make restricted payments (including any dividends or other distributions in respect of our capital stock and any investments); |
• | sell or transfer assets; |
• | enter into affiliate transactions; |
• | create liens; |
• | consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and |
• | take other actions. |
• | low trading volume, which could cause even a small number of purchases or sales of our stock to have an impact on the trading price of our common stock; |
• | price and volume fluctuations in the overall stock market from time to time; |
• | significant volatility in the market price and trading volume of comparable companies; |
• | actual or anticipated changes in our earnings or any financial projections we may provide to the public, or fluctuations in our operating results; |
• | changes in expectations for, or evaluations of, our stock by securities analysts, or decisions by securities or industry analysts not to publish or to cease publishing research or reports about us, our business or our market; |
• | ratings changes by debt ratings agencies; |
• | short sales, hedging and other derivative transactions involving our capital stock; |
• | announcements of technological innovations, new products, strategic alliances, or significant agreements by us or by our competitors; |
• | litigation or regulatory proceedings involving us; and |
• | recruitment or departure of key personnel. |
• | authorizing blank check preferred stock, which could be issued without stockholder approval and with voting, liquidation, dividend and other rights superior to our common stock; |
• | limiting the liability of, and providing indemnification to, our directors and officers; |
• | limiting the ability of our stockholders to call and bring business before special meetings; |
• | providing that any action required or permitted to be taken by our stockholders must be taken at a duly called annual or special meeting of such stockholders and may not be taken by any consent in writing by such stockholders; |
• | requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors, subject to limited exceptions set forth in our stockholders agreement; |
• | controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; |
• | providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings; |
• | establishing a classified board of directors so that not all members of our board are elected at one time; |
• | establishing Delaware as the exclusive jurisdiction for specified types of stockholder litigation involving us or our directors; |
• | providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least three directors for election to our board of directors, certain actions required or permitted to be taken by our stockholders, including amendments to our restated certificate of incorporation or amended and restated bylaws and certain specified corporate transactions, may be effected only with the affirmative vote of 75% of our board of directors, in addition to any other vote required by applicable law; |
• | providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least one director for election to our board of directors and for so long as investment funds and entities affiliated with Goldman Sachs have the right to designate one director for election to our board of directors, in each case, a quorum of our board of directors will not exist without at least one director designee of each of Warburg Pincus and Goldman Sachs present at such meeting, subject to limited exceptions set forth in our stockholders agreement; |
• | limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; subject to limited exceptions set forth in our stockholders agreement; and |
• | providing that directors may be removed by stockholders only for cause by the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors; provided that any director designated by investment funds and entities affiliated with either Warburg Pincus or Goldman Sachs may be removed with or without cause only by Warburg Pincus or Goldman Sachs, respectively. |
Exhibit Number | Description of Exhibit | Incorporated by Reference | Filed Herewith | ||||||||||
Form | File Number | Date of Filing | Exhibit Number | ||||||||||
2.1* | 8-K | 001-36131 | November 2, 2015 | 2.1 | |||||||||
3.1 | S-1/A | 333-191061 | October 23, 2013 | 3.3 | |||||||||
3.2 | 8-K | 001-36131 | January 30, 2017 | 3.1 | |||||||||
4.1 | S-1/A | 333-191061 | October 8, 2013 | 4.1 | |||||||||
4.2 | 10-Q | 001-36131 | November 7, 2014 | 4.2 | |||||||||
4.3 | 10-Q | 001-36131 | November 7, 2014 | 4.3 | |||||||||
4.4 | 8-K | 001-36131 | February 10, 2016 | 4.1 | |||||||||
4.5 | 10-Q | 001-36131 | May 9, 2016 | 4.6 | |||||||||
31.1 | X | ||||||||||||
31.2 | X | ||||||||||||
32.1 | X | ||||||||||||
32.2 | X | ||||||||||||
101.INS | XBRL Instance Document | X | |||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | |||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X |
* | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Endurance agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request. |
ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC. | ||||
Date: November 2, 2018 | By: | /s/ Marc Montagner | ||
Marc Montagner | ||||
Chief Financial Officer (Principal Financial Officer) |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 2, 2018 | By: | /s/ Jeffrey H. Fox | ||
Jeffrey H. Fox Chief Executive Officer (Principal Executive Officer) |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 2, 2018 | By: | /s/ Marc Montagner | ||
Marc Montagner Chief Financial Officer (Principal Financial Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Endurance International Group Holdings, Inc. |
Date: November 2, 2018 | By: | /s/ Jeffrey H. Fox | ||
Jeffrey H. Fox Chief Executive Officer (Principal Executive Officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Endurance International Group Holdings, Inc. |
Date: November 2, 2018 | By: | /s/ Marc Montagner | ||
Marc Montagner Chief Financial Officer (Principal Financial Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 29, 2018 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | EIGI | |
Entity Registrant Name | Endurance International Group Holdings, Inc. | |
Entity Central Index Key | 0001237746 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 143,855,398 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Notes payable-long term original issue discounts, net | $ 22,445 | $ 25,811 |
Deferred financing costs | $ 33,515 | $ 37,736 |
Preferred stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 143,306,748 | 140,190,695 |
Common stock, shares outstanding (in shares) | 143,306,411 | 140,190,695 |
Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Unrealized gain (loss) arising during period, tax | $ 256 | $ 48 | $ 626 | $ (182) |
Nature of Business |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Formation and Nature of Business Endurance International Group Holdings, Inc. (“Holdings”) is a Delaware corporation, which, together with its wholly owned subsidiary company, EIG Investors Corp. (“EIG Investors”), its primary operating subsidiary company, The Endurance International Group, Inc. (“EIG”), and other subsidiaries of EIG, collectively form the “Company.” The Company is a leading provider of cloud-based platform solutions designed to help small- and medium-sized businesses succeed online. EIG and EIG Investors were incorporated in April 1997 and May 2007, respectively, and Holdings was originally formed as a limited liability company in October 2011 in connection with the acquisition of a controlling interest in EIG Investors, EIG and EIG's subsidiaries by investment funds and entities affiliated with Warburg Pincus and Goldman, Sachs & Co. on December 22, 2011. On November 7, 2012, Holdings reorganized as a Delaware limited partnership and on June 25, 2013, Holdings converted into a Delaware C-corporation and changed its name to Endurance International Group Holdings, Inc. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Preparation The accompanying consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared using accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions were eliminated on consolidation. Segment Information From the fourth quarter of fiscal year 2016, through the third quarter of fiscal year 2017, the Company had two reportable segments, web presence and email marketing. The Company experienced significant changes in its management structure during fiscal year 2017, including a change in its chief executive officer, who is the Company's chief operating decision maker ("CODM"). The Company's leadership structure has been revised to centralize management of certain domain-focused brands in order to improve overall performance. As a result of these management changes, management has revised internal financial reporting structures, and broken the former web presence segment into two reportable segments, web presence and domains. The Company's third reportable segment, email marketing, remains unchanged. The products and services included in each of the three reportable segments are as follows: Web Presence. The web presence segment consists primarily of the Company's web hosting brands, such as Bluehost and HostGator, and related products such as domain names, website security, website design tools and services, and e-commerce products. Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to the web presence segment. Email Marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the SinglePlatform digital storefront solution. The Company's segments share certain resources, primarily related to sales and marketing, engineering and general and administrative functions. Management allocates these costs to each respective segment based on a consistently applied methodology, primarily based on a percentage of revenue. The Company has revised amounts reported for gross profit, net loss and adjusted EBITDA for the web presence and the domain segments in the segment disclosures, which impacted fiscal years 2016 and 2017. The amounts reported for the email marketing segment were not impacted. The revisions arose because of an error in the classification of certain domain registration expenses. Domain segment gross profit, net income (loss) and adjusted EBITDA were overstated by $3.0 million for fiscal year 2016, and by $6.9 million for fiscal year 2017, and web presence segment gross profit, net income (loss) and adjusted EBITDA were understated by equal amounts. Consolidated results were not impacted by this misstatement. See Note 21, Segment Information, for further details. Use of Estimates U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, judgments and assumptions used in preparing the accompanying consolidated financial statements are based on the relevant facts and circumstances as of the date of the consolidated financial statements. Although the Company regularly assesses these estimates, judgments and assumptions used in preparing the consolidated financial statements, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. The more significant estimates reflected in these consolidated financial statements include estimates of fair value of assets acquired and liabilities assumed under purchase accounting related to the Company’s acquisitions and when evaluating goodwill and long-lived assets for potential impairment, the estimated useful lives of intangible and depreciable assets, revenue recognition for multiple-element arrangements, stock-based compensation, contingent consideration, derivative instruments, certain accruals, reserves and deferred taxes. Unaudited Interim Financial Information The accompanying interim consolidated balance sheet as of September 30, 2018, and the related consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2018, cash flows for the nine months ended September 30, 2017 and 2018, and the notes to consolidated financial statements are unaudited. These unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the Company’s financial position at September 30, 2018, results of operations for the three and nine months ended September 30, 2017 and 2018 and cash flows for the nine months ended September 30, 2017 and 2018. The consolidated results in the consolidated statements of operations and comprehensive loss are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2018. Cash Equivalents Cash and cash equivalents include all highly liquid investments with remaining maturities of three months or less at the date of purchase. Restricted Cash Restricted cash is composed of certificates of deposit and cash held by merchant banks and payment processors, which provide collateral against any chargebacks, fees, or other items that may be charged back to the Company by credit card companies and other merchants, and collateral for certain facility leases. Accounts Receivable Accounts receivable is primarily composed of cash due from credit card companies for unsettled transactions charged to subscribers’ credit cards. As these amounts reflect authenticated transactions that are fully collectible, the Company does not maintain an allowance for doubtful accounts. The Company also accrues for earned referral fees and commissions, which are governed by reseller or affiliate agreements, when the amount is reasonably estimable. Prepaid Domain Name Registry Fees Prepaid domain name registry fees represent amounts that are paid in full at the time a domain is registered by one of the Company’s registrars on behalf of a customer. The registry fees are recognized on a straight-line basis over the term of the domain registration period. Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and certain accrued expenses, approximate their fair values due to their short maturities. The fair value of the Company's notes payable is based on the borrowing rates currently available to the Company for debt with similar terms and average maturities and approximates their carrying value. Derivative Instruments and Hedging Activities FASB Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, or ASC 815, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance in FASB Accounting Standards Update ("ASU") 2011-4, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Property and Equipment Property and equipment is recorded at cost or fair value if acquired in an acquisition. The Company also capitalizes the direct costs of constructing additional computer equipment for internal use, as well as upgrades to existing computer equipment which extend the useful life, capacity or operating efficiency of the equipment. Capitalized costs include the cost of materials, shipping and taxes. Materials used for repairs and maintenance of computer equipment are expensed and recorded as a cost of revenue. Materials on hand and construction-in-process are recorded as property and equipment. Assets recorded under capital lease are depreciated over the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:
Software Development Costs The Company accounts for software development costs for internal-use software under the provisions of ASC 350-40, Internal-Use Software. Accordingly, certain costs to develop internal-use computer software are capitalized, provided these costs are expected to be recoverable. During the three and nine months ended September 30, 2017, the Company capitalized internal-use software development costs of $2.2 million and $8.4 million, respectively. During the three and nine months ended September 30, 2018, the Company capitalized internal-use software costs of $2.8 million and $7.1 million, respectively. Goodwill Goodwill relates to amounts that arose in connection with the Company’s various business combinations and represents the difference between the purchase price and the fair value of the identifiable intangible and tangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for impairment. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the equity value of the Company's business, a significant adverse change in agreements that would materially affect reported operating results, business climate or operational performance of the business and an adverse action or assessment by a regulator. Additionally, a reorganization or change in the number of reporting units could result in the reassignment of goodwill between reporting units and may trigger an impairment assessment. In accordance with ASC 350, Intangibles—Goodwill and Other, or ASC 350, the Company is required to review goodwill by reporting unit for impairment at least annually or more often if there are indicators of impairment present. Under U.S. GAAP, a reporting unit is either the equivalent of, or one level below, an operating segment. The Company has historically performed its annual goodwill test as of December 31 of each fiscal year. As a result of changes in the Company’s management structure during fiscal year 2017, including the change in its chief executive officer / CODM, the Company has revised its internal financial reporting structure, which has resulted in a change to its reporting units. The Company has identified a total of ten reporting units under the new structure. With the increase in reporting units, the Company determined that more time would be required to perform future goodwill impairment tests, and as a result, decided to accelerate its annual goodwill impairment test date to October 31 of each fiscal year, starting with the fiscal year 2017 test. Before testing goodwill at October 31, 2017, the Company allocated assets and liabilities to their respective reporting units. Goodwill was allocated to each reporting unit in accordance with ASC 350-20-40, which requires that goodwill be allocated based on the relative fair values of each reporting unit. After completing this valuation process, the Company allocated goodwill to seven reporting units. The Company did not allocate any goodwill to three smaller reporting units that were determined to have no material fair value. The carrying value of each reporting unit is based on the assignment of the appropriate assets and liabilities to each reporting unit. Assets and liabilities were assigned to each reporting unit if the assets or liabilities are employed in the operations of the reporting unit and the asset and liability is considered in the determination of the reporting unit fair value. Certain assets and liabilities are shared by multiple reporting units, and were allocated to each reporting unit based on the relative size of a reporting unit, primarily based on revenue. The fair value of each reporting unit is determined by the income approach. The Company also compared the fair value from the income approach to a market based approach to validate that the value derived from the income approach was reasonable. For the income approach, fair value is determined based on the present value of estimated future after-tax cash flows, discounted at an appropriate risk adjusted rate. The Company uses internal forecasts to estimate future after-tax cash flows, which includes an estimate of long-term future growth rates based on the long-term outlook for each reporting unit. Actual results may differ from those assumed in each forecast. The Company derives discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the weighted average cost of capital. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the business and in internally developed forecasts. For fiscal year 2017, the Company used a discount rate of 10.0%, and also performed sensitivity analysis on the discount rates. For the market approach validation, values were derived based on valuation multiples from sales of comparable companies. The Company has also early adopted the provisions of ASU 2017-4, which eliminates the second step of the goodwill impairment test. As a result, the goodwill impairment test as of October 31, 2017 includes only one step, which is a comparison of the carrying value of each reporting unit to its fair value, and any excess carrying value, up to the amount of goodwill allocated to that reporting unit, is impaired. The goodwill impairment test as of October 31, 2017 resulted in a $12.1 million impairment of goodwill to the Company's domain monetization reporting unit within the domain segment. The impairment is a direct result of a more rapid decline in domain parking revenue than originally expected, and to a lesser extent, reduced sales of premium domain names. Goodwill for this reporting unit has been completely impaired. Goodwill allocated to the other six reporting units was not impaired. Goodwill as of December 31, 2017 was $1,850.6 million. Approximately $1,820.7 million of this goodwill relates to reporting units where fair value exceeds the carrying value of the respective reporting unit by at least 20%. One reporting unit, the domain.com reporting unit within the domain segment, has a goodwill balance of $29.9 million, and a fair value that exceeds its carrying value by 6%. The Company has one reporting unit, the cloud backup reporting unit within the web presence segment, that has a negative carrying value and has been allocated $2.3 million of goodwill. During the quarter ended March 31, 2018, the Company further adjusted management responsibilities regarding certain reporting units, which resulted in additional adjustments to internal financial reporting structures. The total number of reporting units remains at ten, however, goodwill was reallocated between reporting units as a result of this change. The Company estimated the amount of goodwill to be reallocated at $48.0 million. The Company tested goodwill for impairment based on the goodwill reallocation. No impairment charge was identified as a result of this test. Goodwill as of September 30, 2018 is $1,849.3 million. The carrying value of goodwill that was allocated to the domain, email marketing and web presence reporting segments was $29.9 million, $604.3 million and $1,215.1 million, respectively. For the three and nine months ended September 30, 2018, no impairment triggering events were identified and no impairment has been recorded. Long-Lived Assets The Company’s long-lived assets consist primarily of intangible assets, including acquired subscriber relationships, trade names, intellectual property, developed technology, domain names available for sale and in-process research and development (“IPR&D”). The Company also has long-lived tangible assets, primarily consisting of property and equipment. The majority of the Company’s intangible assets are recorded in connection with its various acquisitions. The Company’s intangible assets are recorded at fair value at the time of their acquisition. The Company amortizes intangible assets over their estimated useful lives. Determination of the estimated useful lives of the individual categories of intangible assets is based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with finite lives other than developed technology is recognized in accordance with their estimated projected cash flows. The Company evaluates long-lived intangible and tangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment are present and undiscounted future cash flows are less than the carrying amount, the fair value of the assets is determined and compared to the carrying value. If the fair value is less than the carrying value, then the carrying value of the asset is reduced to the estimated fair value and an impairment loss is charged to expense in the period the impairment is identified. During the three and nine months ended September 30, 2017, the Company recognized an impairment charge of $13.8 million relating to certain domain name intangible assets acquired in 2014, which was recorded in cost of revenue in the consolidated statements of operations and comprehensive loss. The impairment resulted from diminished cash flows associated with this intangible asset. No such impairment losses have been identified in the three and nine months ended September 30, 2018. Indefinite life intangible assets include domain names that are available for sale which are recorded at cost to acquire. These assets are not being amortized and are being tested for impairment annually and whenever events or changes in circumstance indicate that their carrying value may not be recoverable. When a domain name is sold, the Company records the cost of the domain in cost of revenue. Acquired In-Process Research and Development (IPR&D) Acquired IPR&D represents the fair value assigned to research and development assets that the Company acquires in connection with business combinations that have not been completed at the date of acquisition. The acquired IPR&D is capitalized as an intangible asset and reviewed on a quarterly basis to determine future use. Any impairment loss of the acquired IPR&D is charged to expense in the period the impairment is identified. No impairment loss was identified during the nine months ended September 30, 2017 and 2018. Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09 or ASC 606, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Since then, the FASB has also issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principals versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, and ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which further elaborate on the original ASU No. 2014-09. The Company adopted the guidance in ASC 606 on January 1, 2018. Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to for those products and services. In general, the Company determines revenue recognition through the following steps:
The Company provides cloud-based subscription services, which include website hosting and related add-ons, search engine optimization (SEO) services, domain registration services and email marketing. Website hosting gives subscribers access to an environment where the Company hosts a customer’s website. The related contract terms are generally for one year, but can range from 30 days to 3 years. Website hosting services are typically sold in bundled offerings that include website hosting, domain registration services and various add-ons. The Company recognizes revenue for website hosting and domain registration services over the term of the contract. The main add-on services related to website hosting are domain privacy, secure sockets layer (SSL) security, site backup and restoration, and website builder tools. These services may be included in website hosting bundles, or they may be purchased on a standalone basis. Certain add-on services are provided by third parties. In cases where the Company is acting as an agent for the sale of third party add-on services, the Company recognizes revenue on a net basis at the time of sale. In cases where the Company is acting as a principal for the sale of third party add-on services (i.e., the Company has the primary responsibility to provide specific goods or services, it has discretion to establish prices and it may assume inventory risk), the Company recognizes revenue on a gross basis over the term of the contract. The revenue for Company-provided add-on services is primarily recognized over the term of the contract. SEO services are monthly subscriptions that provide a customer with increased traffic to their website over the term of the subscription. Revenue from SEO services is recognized over the monthly term of the contract. In the case of domain registration services, the Company is an accredited registrar and can provide registration services to the customer, or it can select an accredited third party registrar to perform these duties. Domain registration services are generally annual subscriptions, but can cover multiple years. Revenue for these services is recognized over time. Email marketing services provide subscribers with a cloud based platform that can send broadcast emails to a customer list managed by the subscriber. Pricing is based on contract list volume from the prior monthly period, which determines the contractual billing price for the upcoming month. Revenue for this service is recognized over the monthly term of the contract. Non-subscription based services include certain professional services, primarily website design or re-design services, marketing development fund revenue ("MDF"), premium domain names and domain parking services. Website design and re-design services are recognized when the service is complete. Marketing development funds consist of commissions earned by the Company when a third party sells its products or services directly to the Company’s subscribers, and advertising revenue for third party ads placed on Company websites. The Company records revenue when the service is provided and calculates it based on the contractual revenue share arrangement or over the term of the advertisement. Domain parking allows the Company to monetize certain of its premium domain names by loaning them to specialized third parties that generate advertising revenue from these parked domains on a pay per click ("PPC") basis. Revenue is recognized when earned and calculated based on the revenue share arrangement with the third party. Revenue from the sale of premium domains is recognized when persuasive evidence of an arrangement to sell such domains exists and delivery of an authorization key to access the domain name has occurred. Premium domain names are paid for in advance prior to the delivery of the domain name. For most of the Company’s performance obligations, the customer simultaneously receives and consumes the service over a period of time as the Company performs the service, resulting in the recognition of revenue over the subscription period. This method provides an appropriate depiction of the timing of the transfer of services to the customer. In limited instances, the customer obtains control of the promised service at a point in time, with no future obligations on the part of the Company. In these instances, the Company recognizes revenue at the point in time control is transferred. The contracts that the Company enters into typically do not contain any variable or non-cash considerations. The Company maintains a reserve for refunds and chargebacks related to revenue that has been recognized and is expected to be refunded, as calculated based on observed historical trends. The Company had a refund and chargeback reserve of $0.5 million and $0.3 million as of December 31, 2017 and September 30, 2018, respectively. The portion of deferred revenue that is expected to be refunded at December 31, 2017 and September 30, 2018 was $1.8 million and $1.8 million, respectively. Based on refund history, approximately 83% of all refunds happen in the same fiscal month that the contract starts or renews, and approximately 96% of all refunds happen within 45 days of the contract start or renewal date. The Company did not apply any practical expedients during its adoption of ASC 606. The Company elected to use the portfolio method in the calculation of the deferred contract assets. Contracts with Multiple Performance Obligations A considerable amount of the Company’s revenue is generated from transactions that are contracts with customers that may include hosting plans, domain name registrations, and other cloud-based products and services. In these cases, the Company determines whether the products and services are distinct performance obligations that should be accounted for separately versus together. The Company allocates revenue to each performance obligation based on its relative standalone selling price, generally based on the price charged to customers. Hosting services, domain name registrations, and other cloud-based products and services have distinct performance obligations and are often sold separately. If the promise is not distinct and therefore not a performance obligation, then the total transaction amount is allocated to the identified performance obligation based on a relative selling price hierarchy. When multiple performance obligations are included in a contract, the total transaction amount for the contract is allocated to the performance obligations based on a relative selling price hierarchy. The Company determines the relative selling price for a performance obligation based on standalone selling price (“SSP”). The Company determines SSP by considering its observed standalone selling prices, competitive prices in the marketplace and management judgment; these standalone selling prices may vary depending upon the particular facts and circumstances related to each deliverable. The Company analyzes the standalone selling prices used in its allocation of transaction amount, at a minimum, on a quarterly basis. Deferred Revenue The Company records deferred revenue when cash payments are received or are due in advance of the Company’s performance, including amounts that are refundable. The change in the deferred revenue balance for the nine months ended September 30, 2018 is primarily driven by cash payments received or due in advance of the Company satisfying its performance obligations, offset by $331.9 million of revenue recognized that were included in the deferred revenue balance at the beginning of the period. The following table provides a reconciliation of the Company's deferred revenue as of September 30, 2018:
The difference between the opening and closing balances of the Company’s deferred liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the nine months ended September 30, 2018, the Company recognized $331.9 million and $0.0 million, respectively, from beginning deferred revenue current and long-term balances existing at December 31, 2017. The Company did not recognize any revenue from performance obligations satisfied in prior periods. The following table provides the remaining performance obligation amounts as of September 30, 2018. These amounts are equivalent to the ending deferred revenue balance of $477.0 million, which includes both short and long-term amounts:
This backlog of revenue related to future performance obligations is prepaid by customers and supported by executed contracts with customers. The Company has established a reserve of $0.3 million for refunds and chargebacks, 96% of which is expected to materialize in the first 45 days. The remainder of the deferred revenue is expected to be recognized in future periods. Deferred Customer Acquisition Costs As a result of the implementation of ASC 606, the Company now capitalizes the incremental costs directly related to obtaining and fulfilling a contract (such as sales commissions and certain direct sales and marketing success based costs), if these costs are expected to be recovered. These costs are amortized over the period the services are transferred to the customer, which is estimated based on customer churn rates for various segments of the business. The Company includes only those incremental costs that would not have been incurred if the contracts had not been entered into:
As of September 30, 2018, the Company has a total of $71.0 million in deferred assets relating to costs incurred to obtain or fulfill contracts in its web presence segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $71.0 million of recoverable, specific, success-based sales commissions. As of September 30, 2018, the Company has a total of $11.4 million deferred assets relating to costs incurred to obtain or fulfill contracts in its email marketing segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $11.4 million of recoverable, specific, success-based sales commissions. As of September 30, 2018, the Company has a total of $1.4 million deferred assets relating to costs incurred to obtain or fulfill contracts in its domain segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $1.4 million of recoverable, specific, success-based sales commissions. During the nine months ended September 30, 2018, the Company recognized total amortization costs related to the above items of $34.5 million, $3.4 million, and $0.3 million in its web presence, email marketing and domain segments, respectively. Significant Judgments The Company sells a number of third party cloud based services to enhance a subscriber’s overall website hosting experience. The Company exercises considerable judgment to determine if it is the principal or agent in each of these arrangements, and in some instances, has concluded that it is an agent of the third party and recognizes revenue at time of subscriber purchase in an amount that is net of the revenue share payable to the third party. The Company exercises judgment to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the standalone selling price using information that may include a competitive market assessment approach and other observable inputs. The Company typically has more than one standalone selling price for individual products and services. Judgment is required to determine whether particular types of sales and marketing costs incurred, including commissions, are incremental and recoverable costs incurred to obtain and fulfill the customer contract. In addition, judgment is required to determine the life of the customer over which deferred customer acquisition costs are amortized. Income Taxes Income taxes are accounted for in accordance with ASC 740, Accounting for Income Taxes, or ASC 740. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is more likely than not to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company had unrecognized tax benefits at December 31, 2017 and September 30, 2018 of $1.1 million and $2.9 million, respectively. The Company records interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the three and nine months ended September 30, 2017, the Company did not incur any interest and penalties related to unrecognized tax benefits. During the three months ended September 30, 2018, the Company recognized $0.1 million of interest and penalties related to unrecognized tax benefits. During the nine months ended September 30, 2018, the Company recognized $0.3 million of interest and penalties related to unrecognized tax benefits. Stock-Based Compensation The Company may issue restricted stock units, restricted stock awards and stock options which vest upon the satisfaction of a performance condition and/or a service condition. The Company follows the provisions of ASC 718, Compensation—Stock Compensation, or ASC 718, which requires employee stock-based payments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods, net of estimated forfeitures. The Company uses the straight-line amortization method for recognizing stock-based compensation expense. In addition, for stock-based awards where vesting is dependent upon achieving certain performance goals, the Company estimates the likelihood of achieving the performance goals against established performance targets. The Company estimates the fair value of employee stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of highly subjective estimates and assumptions. For restricted stock awards and restricted stock units granted, the Company estimates the fair value of each restricted stock award or restricted stock unit based on the closing trading price of its common stock on the date of grant. Net Loss per Share The Company considered ASC 260-10, Earnings per Share, or ASC 260-10, which requires the presentation of both basic and diluted earnings per share in the consolidated statements of operations and comprehensive loss. The Company’s basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and, if there are dilutive securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method.
The following number of weighted average potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been anti-dilutive:
Recent Accounting Pronouncements - Recently Adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Since then, the FASB has also issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principals versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, and ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which further elaborate on the original ASU No. 2014-09. The core principle of these updates is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgments and estimates may be required within the revenue recognition process than are required under previous U.S. GAAP. In July 2015, the FASB approved a one-year deferral of the effective date to January 1, 2018, with early adoption to be permitted as of the original effective date of January 1, 2017. Once this standard became effective, companies may use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures) (the "modified retrospective approach"). The Company adopted this guidance on January 1, 2018 using the modified retrospective approach. The new standard impacted the timing of when certain sales incentive payments, primarily to external parties, are charged to expense as these costs must now be deferred over the life of the related customer relationship, whereas previously these amounts were expensed as incurred. In addition, a small portion of the Company's revenue recognition was impacted by this new guidance. The impact to opening retained earnings as a result of the adoption of the new guidance was $59.4 million, which consists of an $83.4 million deferred asset relating to customer acquisition costs and a $6.1 million deferred asset for domain registration costs, partially offset by a $23.1 million liability for deferred revenue, net of a deferred tax liability of $7.0 million. The Company applied the new guidance to all revenue contracts and did not use any practical expedients. The adoption of Topic 606 impacted the results of operations and certain balance sheet accounts. The impact of applying Topic 606 on the results for reporting periods and balance sheet beginning after January 1, 2018 is presented under Topic 606, while prior amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605. The impact of applying Topic 606 as of September 30, 2018 is as follows:
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This new standard enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. This new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's statement of cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This new standard clarifies certain statement of cash flow presentation issues. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's statement of cash flows. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. This new standard eliminates step two of the prior goodwill test, and instead requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 31, 2019, and should be applied on a prospective basis. The Company elected to early adopt the provisions of ASU 2017-04 effective in the fourth quarter of fiscal year 2017, which simplified the process of calculating the $12.1 million impairment to goodwill during the fourth quarter of fiscal year 2017. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718). This new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This amendment is effective for annual or interim periods in fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. The Company adopted this guidance as of January 1, 2018 and will apply this guidance to any modifications, based on the new definition of a modification, for all periods beginning on or after January 1, 2018. During the three and nine months ended September 30, 2018, there were no modifications that would impact the Company's consolidated financial statements. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This new guidance better aligns an entity's risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and to the method of presenting hedge results. The amendments in this guidance require an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported, to allow users to better understand the results and costs of an entity's hedging program. This new guidance is effective for fiscal years beginning after December 15, 2019 and early adoption is allowed. The amended presentation and disclosure guidance is required only prospectively, while the measurement guidance should be applied to hedges existing at the time of adoption through a one-time cumulative-effect adjustment to accumulated other comprehensive income with respect to the elimination of the separate measurement of ineffectiveness with a corresponding adjustment to the opening balance of the retained earnings. The Company adopted this guidance on June 1, 2018 using the modified retrospective approach. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements. Recent Accounting Pronouncements - Recently Issued In February 2016, the FASB issued ASU No. 2016-02, Leases. Since then, the FASB has also issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which further clarifies ASU No. 2016-02 and corrects unintended application of guidance. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of its pending adoption of the new standard on its consolidated financial statements, but expects that the adoption will materially increase its assets and liabilities. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. This new standard improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This amendment is effective for annual periods beginning after December 15, 2018, and early adoption is permitted. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718). The new guidance expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in ASU No. 2018-07 specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards to a non-employee. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contract with Customers. The new guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted, provided the company has already adopted the guidance in Topic 606. A company should only remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the company is required to measure these nonemployee awards at fair value as of the adoption date. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements. |
Correction of Income Tax Expense - Fiscal Year 2018 |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Correction of Income Tax Expense - Fiscal Year 2018 | Correction of Income Tax Expense - Fiscal Year 2018 The Company has revised its deferred income tax provision for the first and second quarter of 2018 to reflect a revision that favorably impacted net income (loss) for these periods. During fiscal year 2017, the Company began a process to reorganize, and in some instances, eliminate legal entities associated with certain products introduced in 2015 and 2016. This reorganization is expected to provide tax benefits, as the Company can deduct losses on the investments in these entities in its U.S. income tax filings. After further review of these losses, the Company has determined that a significant portion of these losses should have been reflected in its 2017 income tax provision calculations. The Company has increased its net operating loss ("NOL") carry-forwards available to offset future U.S. federal taxable income from $157.6 million as of December 31, 2017, to $236.3 million. Additionally, NOL carry-forwards available to offset future state taxable income were increased from $128.6 million as of December 31, 2017, to $168.3 million. These changes in NOL carry-forwards did not impact the actual income tax provision recorded in 2017; however, due to the changes enacted in the 2017 Tax Cuts and Jobs Act, the manner in which net operating loss carry-forwards are handled does impact the Company's 2018 provision for non-cash deferred income taxes. The impact of this revision on the Company’s financial statements as originally filed for the first and second quarter of fiscal year 2018 is detailed below. The following table represents the impact of the income statement revision to the first and second quarters of 2018 due to the revised deferred income tax provision (in thousands, except per share data):
The following table represents the impact of the revised deferred income tax provision on the impacted balance sheet accounts as of the dates shown (in thousands):
The following table represents the impact of the revised deferred income tax provision on the impacted lines of the statement of cash flows for the periods shown (in thousands):
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Acquisitions |
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Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions The Company did not make any acquisitions during the three and nine months ended September 30, 2017 and 2018. The Company has a remaining deferred consideration liability related to its acquisition of AppMachine B.V., which had taken place in 2016. Deferred consideration at December 31, 2017 related to AppMachine was $7.9 million, of which, $4.4 million was classified as short-term. Deferred consideration at September 30, 2018 related to AppMachine was $3.7 million, of which $2.4 million was classified as short-term. |
Property and Equipment and Capital Lease Obligations |
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Property and Equipment and Capital Lease Obligations | Property and Equipment and Capital Lease Obligations Components of property and equipment consisted of the following:
Depreciation expense related to property and equipment for the three months ended September 30, 2017 and 2018 was $13.6 million and $11.9 million, respectively. Depreciation expense related to property and equipment for the nine months ended September 30, 2017 and 2018 was $40.7 million and $36.8 million, respectively. Property under capital lease with a cost basis of $15.5 million was included in software as of September 30, 2018. The net carrying value of property under capital lease as of September 30, 2018 was $10.6 million. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements The following valuation hierarchy is used for disclosure of the valuation inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. As of December 31, 2017 and September 30, 2018, the Company’s financial assets required to be measured on a recurring basis consist of the 2015 interest rate cap and the 2018 interest rate cap. The Company has classified these interest rate caps, which are discussed in Note 7 below, within Level 2 of the fair value hierarchy. Basis of Fair Value Measurements
The carrying amounts of the Company's other financial assets and liabilities including cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement. |
Derivatives and Hedging Activities |
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Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging Activities | Derivatives and Hedging Activities Risk Management Objective of Using Derivatives The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings. Cash Flow Hedges of Interest Rate Risk The Company has entered into two three-year interest rate caps as part of its risk management strategy. The interest rate caps, designated as cash flow hedges of interest rate risk, provide for the payment to the Company of variable amounts if interest rates rise above the strike rate on the contract in exchange for an upfront premium. Therefore, these derivatives limit the Company’s exposure if the interest rate rises, but also allow the Company to benefit when the interest rate falls. The changes in the fair value of derivatives that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income ("AOCI"), and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. In December 2015, the Company entered into a three-year interest rate cap with $500.0 million notional value outstanding. This interest rate cap was effective beginning on February 29, 2016. The fair value of this interest rate contract included in other assets on the consolidated balance sheet as of September 30, 2018 was $1.0 million, and the Company recognized $0.6 million and $1.2 million of interest expense, respectively, in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2018. The Company recognized a $1.9 million gain, net of a tax expense of $0.1 million, in AOCI for the nine months ended September 30, 2018. The Company estimates that a cumulative amount of $0.1 million will be reclassified from AOCI to interest expense (as an increase to interest expense) in the next twelve months. In June 2018, the Company entered into a three-year interest rate cap with $800.0 million notional value outstanding. This interest rate cap was effective beginning on August 28, 2018. The fair value of this interest rate contract included in other assets on the consolidated balance sheet as of September 30, 2018 was $5.9 million, and the Company recognized $0.4 million and $0.5 million, respectively, of interest expense in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2018. The Company recognized a $0.7 million gain, net of a tax expense of $0.2 million, in AOCI for the nine months ended September 30, 2018. The Company estimates that $1.7 million will be reclassified from AOCI to interest expense (as an increase to interest expense) in the next twelve months. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The following table summarizes the changes in the Company’s goodwill balances from December 31, 2017 to September 30, 2018:
In accordance with ASC 350, the Company reviews goodwill and other indefinite-lived intangible assets for indicators of impairment on an annual basis and between tests if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount. At December 31, 2017, other intangible assets consisted of the following:
During the nine months ended September 30, 2017 and 2018, there were no impairment charges of intangible assets. At September 30, 2018, other intangible assets consisted of the following:
The estimated useful lives of the individual categories of other intangible assets are based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with finite lives is recognized over the period of time the assets are expected to contribute to future cash flows. The Company amortizes finite-lived intangible assets over the period in which the economic benefits are expected to be realized based upon their estimated projected cash flows. The Company’s amortization expense is included in cost of revenue in the consolidated statement of operations and comprehensive loss in the aggregate amounts of $35.3 million and $26.2 million for the three months ended September 30, 2017 and 2018, respectively. The Company's amortization expense is included in cost of revenue in the aggregate amounts of $104.6 million and $77.9 million for the nine months ended September 30, 2017 and 2018, respectively. |
Investments |
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Sep. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments As of December 31, 2017 and September 30, 2018, the Company’s carrying value of investments in privately-held companies was $15.3 million and $15.3 million, respectively. In January 2012, the Company made an initial investment of $0.3 million to acquire a 25% interest in BlueZone Labs, LLC (“BlueZone”), a provider of “do-it-yourself” tools and managed search engine optimization services. The Company also has an agreement with BlueZone to purchase products and services. During the three months ended September 30, 2017 and 2018, the Company purchased $0.4 million and $0.2 million, respectively, of products and services from BlueZone, which is included in cost of revenue in the Company’s consolidated statements of operations and comprehensive loss. During the nine months ended September 30, 2017 and 2018, the Company purchased $1.3 million and $0.9 million, respectively, of products and services from BlueZone, which is included in cost of revenue in the Company's consolidated statements of operations and comprehensive loss. As of December 31, 2017 and September 30, 2018, $0.1 million and $0.0 million, respectively, relating to the Company’s investment in BlueZone was included in accounts payable and accrued expense in the Company’s consolidated balance sheet. As of December 31, 2017 and September 30, 2018, $0.7 million and $0.1 million, respectively, relating to the Company’s investment in BlueZone was included in prepaid expenses and other current assets in the Company’s consolidated balance sheet. The investment is accounted for using the measurement alternative under ASU 2016-01, Financial Instruments - Overall, as fair value is not readily available. In May 2014, the Company made a strategic investment of $15.0 million in Automattic, Inc. (“Automattic”), which provides content management systems associated with WordPress. The investment represents less than 5% of the outstanding shares of Automattic and better aligns the Company with an important partner. The investment is accounted for using the measurement alternative under ASU 2016-01 as fair value is not readily available. Investments in which the Company’s interest is less than 20% and which are not classified as available-for-sale securities are carried at the lower of cost or net realizable value unless it is determined that the Company exercises significant influence over the investee company, in which case the equity method of accounting is used. For those investments in which the Company’s voting interest is between 20% and 50%, the equity method of accounting is used. Under this method, the investment balance, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee company, as they occur, limited to the extent of the Company’s investment in, advances to and commitments for the investee. These adjustments are reflected in equity (income) loss of unconsolidated entities, net of tax in the Company’s consolidated statements of operations and comprehensive loss. The amount of (income) loss recognized from these investments in all periods presented in the Company's consolidated statement of operations has not been material for any of those periods.From time to time, the Company may make new and follow-on investments and may receive distributions from investee companies. As of September 30, 2018, the Company was not obligated to fund any follow-on investments in these investee companies. As of September 30, 2018, the Company did not have an equity method investment in which the Company’s proportionate share of the investee’s net income or loss exceeded 10% of the Company’s consolidated assets or income from continuing operations. |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | Notes Payable At December 31, 2017 and September 30, 2018, notes payable, net of original issuance discounts (sometimes referred to as "OID") and deferred financing costs, consisted of the following:
2018 First Lien Term Loan Facility In connection with the Company's June 20, 2018 refinancing of its then-outstanding term loan (the "2018 Refinancing"), the Company entered into its current first lien term loan facility (the "2018 Term Loan") with an original balance of $1,580.3 million and a maturity date of February 9, 2023. As of September 30, 2018, the 2018 Term Loan had an outstanding balance of:
The 2018 Term Loan was issued at par and automatically bears interest at an alternate base rate unless the Company gives notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the 2018 Term Loan is 3.75% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the 2018 Term Loan is 2.75% per annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%. The 2018 Term Loan requires quarterly mandatory repayments of principal. During the nine months ended September 30, 2018, following the 2018 Refinancing, the Company made two mandatory repayments of $7.9 million each, one voluntary prepayment of $17.0 million and one voluntary prepayment of $17.5 million. Interest is payable on maturity of the elected interest period for a term loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a term loan with an alternate base rate. 2017 First Lien Term Loan Facility The Company's prior first lien term loan facility (the "2017 Term Loan") was entered into in connection with the Company's June 14, 2017 refinancing of its then-outstanding term loans (the "2017 Refinancing"). The 2017 Term Loan had an original balance of $1,697.3 million and a maturity date of February 9, 2023. As of December 31, 2017 and September 30, 2018, the 2017 Term Loan had an outstanding balance of:
The 2017 Term Loan was issued at a price of 99.75% of par and automatically bore interest at an alternate base rate unless the Company gave notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the 2017 Term Loan was 4.00% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the 2017 Term Loan was 3.00% per annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%. The 2017 Term Loan required quarterly mandatory repayments of principal. During the nine months ended September 30, 2018, prior to the 2018 Refinancing, the Company made one mandatory repayment of $8.5 million and one voluntary repayment of $17.0 million. Interest was payable on maturity of the elected interest period for a term loan with a LIBOR-based interest rate, which interest period could be one, two, three or six months. Interest was payable at the end of each fiscal quarter for a term loan with an alternate base rate. As part of the 2018 Refinancing, the Company refinanced the then-outstanding 2017 Term Loan balance of $1,580.3 million. Revolving Credit Facility In connection with the Company's February 9, 2016 acquisition of Constant Contact and the related financing of that transaction (the "Constant Contact Financing"), the Company entered into a revolving credit facility (the “2016 Revolver”) that replaced the Company's prior revolving credit facility. The 2016 Revolver has an aggregate available amount of $165.0 million. As of December 31, 2017 and September 30, 2018, the Company did not have any balances outstanding under the 2016 Revolver and the full amount of the facility was unused and available. In June 2018, the Company extended the maturity of a portion of the 2016 Revolver. The 2016 Revolver consists of a non-extended tranche of approximately $58.8 million and an extended tranche of approximately $106.2 million. The non-extended tranche has a maturity date of February 9, 2021. The extended tranche has a maturity date of June 20, 2023, with a "springing" maturity date of November 10, 2022 if the 2018 Term Loan has not been repaid in full or otherwise extended to September 19, 2023 or later prior to November 10, 2022. The Company has the ability to draw down against the 2016 Revolver using a LIBOR-based interest rate or an alternate base rate. The LIBOR-based interest rate for a non-extended revolving loan is 4.0% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 3.25% per annum (subject to a leverage-based step-down), in each case plus an adjusted LIBOR for a selected interest period. The alternate base rate for a non-extended revolving loan is 3.0% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 2.25% per annum (subject to a leverage-based step-down), in each case plus the greatest of the prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR or a one-month interest period plus 1.00%. There is also a non-refundable commitment fee, equal to 0.50% per annum (subject to a leverage-based step-down) of the daily unused principal amount of the 2016 Revolver, which is payable in arrears on the last day of each fiscal quarter. Interest is payable on maturity of the elected interest period for a revolver loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a revolver loan with an alternate base rate. Senior Notes In connection with the Constant Contact Financing, EIG Investors issued $350.0 million aggregate principal amount of senior notes (the "Senior Notes") with a maturity date of February 1, 2024. The Senior Notes were issued at a price of 98.065% of par and bear interest at the rate of 10.875% per annum. The Senior Notes have been fully and unconditionally guaranteed, on a senior unsecured basis, by the Company and its subsidiaries that guarantee the 2018 Term Loan and the 2016 Revolver (including Constant Contact and certain of its subsidiaries). The Company has the right to redeem all or a part of the Senior Notes at any time for a premium which is based on the applicable redemption date. As of December 31, 2017 and September 30, 2018, the Senior Notes had an outstanding balance of:
Interest on the Senior Notes is payable twice a year, on August 1 and February 1. On January 30, 2017, the Company completed a registered exchange offer for the Senior Notes, as required under the registration rights agreement it entered into with the initial purchasers of the Senior Notes. All of the $350.0 million aggregate principal amount of the Senior Notes was validly tendered for exchange as part of this exchange offer. Maturity of Notes Payable The maturity of the notes payable at September 30, 2018 is as follows:
Interest The Company recorded $35.8 million and $37.5 million in interest expense for the three months ended September 30, 2017 and 2018, respectively, and $121.0 million and $111.9 million for the nine months ended September 30, 2017 and 2018, respectively. The following table provides a summary of interest rates and interest expense for the three and nine months ended September 30, 2017 and 2018:
* The Company did not have debt bearing interest based on the alternate base rate for the three and nine months ended September 30, 2017 and 2018. The Company concluded that the 2017 Refinancing was primarily a debt modification of the existing term loans in accordance with ASC 470-50, Debt: Modifications and Extinguishments, with extinguishment relating only to a few existing lenders that did not participate in the 2017 Refinancing. As a result, during the second quarter of 2017, the Company capitalized $4.2 million of additional OID and $0.9 million of deferred financing costs related to new lenders participating in the 2017 Term Loan. These capitalized costs were being amortized over the remaining life of the loan using the effective interest method. Additionally in the second quarter of 2017, the Company recorded a charge of $1.0 million, included in interest expense, to write off OID and deferred financing costs related to the refinanced debt for lenders not participating in the 2017 Term Loan. Lastly, the Company recorded a charge of $5.5 million during the second quarter of 2017, included in interest expense, for deferred financing costs incurred for the 2017 Term Loan that related to existing lenders that carried over from the refinanced debt. The Company concluded that the 2018 Refinancing was primarily a debt modification of the existing term loan in accordance with ASC 470-50, Debt: Modifications and Extinguishments, with extinguishment relating only to one existing lender that did not participate in the 2018 Refinancing. As a result, during the second quarter of 2018, the Company capitalized $0.4 million of deferred financing costs related to new lenders participating in the 2018 Term Loan. These capitalized costs will be amortized over the remaining life of the loan using the effective interest method. Additionally, in the second quarter of 2018, the Company recorded a charge of $0.3 million, included in interest expense, to write off OID and deferred financing costs related to the refinanced debt for the lender not participating in the 2018 Term Loan. Lastly, the Company recorded a charge of $1.2 million during the second quarter of 2018, included in interest expense, for deferred financing costs incurred for the 2018 Term Loan that related to existing lenders that carried over from the refinanced debt. Debt Covenants The 2018 Term Loan and 2016 Revolver (together, the "Senior Credit Facilities") require that the Company complies with a financial covenant to maintain a maximum ratio of consolidated senior secured net indebtedness to an adjusted consolidated EBITDA measure. The Senior Credit Facilities also contain covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. These covenants are subject to a number of important limitations and exceptions. Additionally, the Senior Credit Facilities require the Company to comply with certain negative covenants and specify certain events of default that could result in amounts becoming payable, in whole or in part, prior to their maturity dates. With the exception of certain equity interests and other excluded assets under the terms of the Senior Credit Facilities, substantially all of the Company's assets are pledged as collateral for the obligations under the Senior Credit Facilities. The indenture with respect to the Senior Notes contains covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. Upon a change of control as defined in the indenture, the Company must offer to repurchase the Senior Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, up to, but not including, the repurchase date. These covenants are subject to a number of important limitations and exceptions. The indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately. The Company was in compliance with all covenants at September 30, 2018. |
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Stockholders' Equity | Stockholders’ Equity Voting Rights All holders of common stock are entitled to one vote per share. Changes in Total Stockholders' Equity The following table presents the changes in total stockholders’ equity during the nine months ended September 30, 2018:
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation 2013 Stock Incentive Plan The Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) of the Company became effective upon the closing of its initial public offering ("IPO"). The 2013 Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, officers, directors, consultants and advisers of the Company. Under the 2013 Plan, the Company may issue up to 38,000,000 shares of the Company’s common stock. At September 30, 2018, there were 16,722,969 shares available for grant under the 2013 Plan. 2011 Stock Incentive Plan As of February 9, 2016, the effective date of the acquisition of Constant Contact, the Company assumed and converted certain outstanding equity awards granted by Constant Contact under the Constant Contact 2011 Stock Incentive Plan (the “2011 Plan”) prior to the effective date of the acquisition (the “Assumed Awards”) into corresponding equity awards with respect to shares of the Company’s common stock. In addition, the Company assumed certain shares of Constant Contact common stock, par value $0.01 per share, available for issuance under the 2011 Plan (the “Available Shares”), which will be available for future issuance under the 2011 Plan in satisfaction of the vesting, exercise or other settlement of options and other equity awards that may be granted by the Company following the effective date of the acquisition of Constant Contact in reliance on the prior approval of the 2011 Plan by the stockholders of Constant Contact. The Assumed Awards were converted into 2,143,987 stock options and 2,202,846 restricted stock units with respect to the Company’s common stock and the Available Shares were converted into 10,000,000 shares of the Company’s common stock reserved for future awards under the 2011 Plan. At September 30, 2018, there were 8,390,174 shares available for grant under the 2011 Plan. All Plans The following table presents total stock-based compensation expense recorded in the consolidated statement of operations and comprehensive loss for all awards granted under the Company’s 2013 Plan and 2011 Plan:
2013 Stock Incentive Plan The following table provides a summary of the Company’s stock options as of September 30, 2018 and the stock option activity for all stock options granted under the 2013 Plan during the nine months ended September 30, 2018:
Restricted stock units granted under the 2013 Plan generally vest annually over a three-year period, unless otherwise determined by the Company’s board of directors. The following table provides a summary of the Company’s restricted stock unit activity for the 2013 Plan during the nine months ended September 30, 2018:
Restricted stock awards granted under the 2013 Plan generally vest annually over a four-year period, unless otherwise determined by the Company’s board of directors. Performance-based restricted stock awards are earned based on the achievement of performance criteria established by the Company’s compensation committee and board of directors. The following table provides a summary of the Company’s restricted stock award activity for the 2013 Plan during the nine months ended September 30, 2018:
2015 Performance Based Award During fiscal year 2015, the Company granted a performance-based restricted stock award to the Company’s chief executive officer ("CEO") at that time, Hari Ravichandran, which provided for the opportunity to earn up to 3,693,754 shares of the Company’s common stock (the “Award Shares”) over a three-year period beginning July 1, 2015 and ending on June 30, 2018 (the “Performance Period”). Award Shares could be earned based on the Company achieving pre-established threshold, target and maximum performance metrics. In April 2017, the Company announced that its board of directors and Mr. Ravichandran adopted a CEO transition plan. As a result of this transition, Mr. Ravichandran's employment with the Company ended during the fourth quarter of fiscal year 2017. Upon the end of his employment, in accordance with the terms of the award, Mr. Ravichandran received the Award Shares earned in the quarters completed prior to the separation, plus the number of Award Shares that would have been earned in the quarter in which the separation occurred, which amounted to an aggregate of 1,661,439 shares. The unearned 2,032,315 shares were forfeited. All charges relating to this award were recognized prior to January 1, 2018. 2016 Performance Based Awards On February 16, 2016, the compensation committee of the board of directors of the Company approved the grant of performance-based restricted stock awards to the Company’s chief financial officer (“CFO”), chief operating officer (“COO”) at that time and chief administrative officer (“CAO”) at that time. Based on the Company's achievement of Constant Contact revenue, adjusted EBITDA and cash flow metrics, each executive earned the maximum number of shares subject to his or her award. The CFO earned 223,214 shares of the Company’s stock, the COO earned 260,416 shares of the Company’s stock, and the CAO earned 148,810 shares of the Company’s stock. These earned shares vested on March 31, 2017. During the three months ended March 31, 2017, the Company recognized $1.2 million of stock-based compensation expense related to these performance-based awards, which was the last quarter stock-based compensation was recorded relating to these awards. New CEO Award On August 11, 2017, the Company and Jeffrey H. Fox entered into an employment agreement (the “Employment Agreement”) appointing Mr. Fox as the Company’s president and chief executive officer effective upon his employment start date (the “Effective Date”) of August 22, 2017. The Employment Agreement provided for Mr. Fox to receive, on the Effective Date, an equity award under the 2013 Plan with a total value of $10,375,000 as of August 11, 2017, split between an award of 1,032,500 restricted stock units (the “RSU Award”) and an option to purchase 612,419 shares of the Company’s common stock (the “Stock Option Grant”). Two Hundred Eighty-Two Thousand Five Hundred (282,500) of the restricted stock units subject to the RSU Award vested immediately on the Effective Date, but are subject to a requirement that Mr. Fox hold the shares underlying such restricted stock units until the earlier of the third anniversary of the Effective Date, his death or disability (as defined in the Employment Agreement) or a change in control of the Company (as defined in the Employment Agreement). The Company recorded a charge of $2.2 million for these immediately vested shares during the three months ended September 30, 2017. The remaining 750,000 restricted stock units subject to the RSU Award will vest over a three-year period, with 250,000 of such restricted stock units vesting annually on the anniversary of the Effective Date. The Stock Option Grant will vest over a three-year period, with one-third of the total number of shares subject to the Stock Option Grant vesting on the first anniversary of the Effective Date and the remainder vesting in equal monthly installments thereafter. 2011 Stock Incentive Plan The following table provides a summary of the Company’s stock options as of September 30, 2018 and the stock option activity for all stock options granted under the 2011 Plan during the nine months ended September 30, 2018:
Unless otherwise determined by the Company’s board of directors, restricted stock units granted under the 2011 Plan generally vest annually over a three- or a four-year period. The following table provides a summary of the Company’s restricted stock unit activity for the 2011 Plan during the nine months ended September 30, 2018:
Under both the 2011 and 2013 Plans combined, as of September 30, 2018 the Company had approximately $8.9 million of unrecognized stock-based compensation expense related to option awards that will be recognized over 1.6 years and approximately $43.7 million of unrecognized stock-based compensation expense related to restricted stock awards and restricted stock units that will be recognized over 2.1 years. |
Accumulated Other Comprehensive Income |
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Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The following table presents the components of accumulated other comprehensive income (loss):
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entity | Variable Interest Entity The Company, through a subsidiary formed in China, entered into various agreements with Shanghai Xiao Lan Network Technology Co., Ltd (“Shanghai Xiao”) and its shareholders that allowed the Company to effectively control Shanghai Xiao, making it a variable interest entity (“VIE”). Shanghai Xiao has a technology license that allows it to provide local hosting services to customers located in China. During fiscal year 2018, the Company ceased operations of the VIE, and has begun the process to liquidate the entity. From inception and through the period ended September 30, 2018, the financial position and results of operations of Shanghai Xiao are consolidated within, but are not material to, the Company’s consolidated financial position or results of operations. |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Adoption of ASC Topic 606, “Revenue from Contracts with Customers” The Company recorded a net increase to opening retained earnings of $59.4 million as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to customer acquisition costs. The impact to revenue and customer acquisition costs during the three months ended September 30, 2018 as a result of applying Topic 606 was a decrease of $0.6 million and an increase of $0.0 million, respectively. The impact to revenue and customer acquisition costs during the nine months ended September 30, 2018 was a decrease of $1.2 million and an increase of $0.5 million, respectively. During the three and nine months ended September 30, 2018, the Company recognized $283.8 million and $862.9 million of revenue, respectively, the majority of which was derived from contracts with customers. During the three and nine months ended September 30, 2018, the Company did not incur any impairment losses on any receivables or contract assets arising from the Company’s contracts with customers. During the three and nine months ended September 30, 2018, the Company did not incur any credit losses on any receivables or contract assets, arising from the Company’s contracts with customers. In accordance with ASC 606, the Company disaggregates revenue from contracts with customers based on the timing of revenue recognition. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. As discussed in Note 21. Segment Information, the Company business consists of the web presence, domain and email marketing segments. The following table presents disaggregated revenues by category for the three and nine months ended September 30, 2018:
Subscriber revenue is primarily recognized over time, when the services are performed, except for third party products for which the Company acts as an agent. Revenue from third party products for which the Company acts as an agent is recognized at a point in time, when the revenue is earned. Revenue, classified by the major geographic areas in which the Company’s customers are located, was as follows for the three and nine months ended September 30, 2018:
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Redeemable Non-controlling Interest |
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Sep. 30, 2018 | |
Noncontrolling Interest [Abstract] | |
Redeemable Non-controlling Interest | Redeemable Non-controlling Interest On January 6, 2016, the Company increased its stake from a 49.0% to a 57.5% controlling interest in WZ (UK) Ltd. ("WZ UK"), an entity specialized in marketing certain of the Company's products. The minority shareholders could put their non-controlling interest, or NCI, to the Company within pre-specified put periods. As the NCI was subject to a put option that was outside the control of the Company, it was deemed a redeemable non-controlling interest and was not recorded in permanent equity, and was presented in mezzanine redeemable non-controlling interest on the consolidated balance sheet. The Company increased its ownership interest in WZ UK to 77.5% in May of 2016. On July 13, 2016, the Company completed a restructuring with the minority shareholders that resulted in Pseudio Limited and Resume Labs Limited becoming wholly-owned subsidiaries of WZ UK, and acquired an increased ownership interest in the consolidated entity which brought the Company's ownership of WZ UK to 86.4%. The restructuring significantly reduced the amount of the potential redemption amount payable to the minority shareholders, and gave the Company the flexibility to reduce investments in this business. Based on these reduced investments, the estimated value of the non-controlling interest was below the expected redemption amount of $25.0 million, which resulted in $14.2 million of excess accretion that reduced income available to common shareholders for the period starting on the date of the restructuring through the redemption date of July 1, 2017. The Company recognized excess accretion of $0.0 million and $7.2 million for the three and nine months ended September 30, 2017, respectively, which is reflected in net loss attributable to accretion of non-controlling interest in the Company’s consolidated statements of operations and comprehensive loss. Prior to the third quarter of 2016, the Company did not have any accretion amounts in excess of fair value. On July 7, 2017, the Company redeemed the remaining redeemable non-controlling interest for $25.0 million. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||
Income Taxes | Income Taxes On December 22, 2017, the United States enacted tax reform legislation by passage of the commonly named Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21% and a move from a worldwide tax system to a territorial system, as well as other changes. As a result of enactment of the legislation, the Company incurred an additional one-time income tax benefit on the re-measurement of certain deferred tax assets and liabilities in the amount of $16.9 million for the year ended December 31, 2017. The legislation also introduced substantial international tax reform that moves the U.S. toward a territorial system, in which income earned in other countries will generally not be subject to U.S. taxation. The accumulated foreign earnings of U.S. shareholders of certain foreign corporations will be subject to a one-time transition tax. Amounts held in cash or cash equivalents will be subject to a 15.5% tax, while amounts held in illiquid assets will be subject to an eight percent tax. Due to an accumulated deficit in the undistributed earnings of the Company's foreign subsidiaries, the one-time transition tax will not apply to the Company. Additionally, the legislation also contains provisions which would generally limit the Company's deduction for interest expense to 30% of adjusted taxable earnings before interest, taxes, depreciation and amortization ("Tax EBITDA"). The legislation includes provisions which provide a deduction related to intangible income that is owned in the U.S., an additional tax charge related to income from intangibles owned outside the U.S., and a new base-erosion and anti-abuse tax. Although the Company has substantially completed its work on the effects of the Tax Cuts and Jobs Act, it continues to evaluate certain sections of the new law that may be pertinent to the Company's tax situation. The Company has also adopted an accounting policy, as provided by the FASB in their January 10, 2018 Board Meeting, to account for the tax effects of the Global Intangible Low Tax Income ("GILTI") in the periods that the Company is subject to such tax. As a result of this accounting policy, the Company will not be recording the tax effect of the deferred tax assets and liabilities associated with the GILTI tax. During fiscal year 2017, the Company recorded a deferred tax expense and maintained a deferred tax liability to account primarily for the different book and tax treatment of tax deductible goodwill. Prior to 2018, the Company could not utilize deferred tax assets against the portion of the deferred tax liability related to tax deductible goodwill, as that liability was considered to have an indefinite life. With the passage of the Tax Cuts and Jobs Act, NOL carry-forwards generated after 2017 and the carry-forward of disallowed interest expense are indefinite in life, and therefore are eligible to offset indefinite life deferred tax liabilities. The Company's deferred tax expense (benefit) during 2018 has been impacted by this change. As described in Note 3, the Company has revised its deferred income tax provision for the first and second quarter of 2018 to reflect an increase in NOL carry-forwards resulting from the reorganization and liquidation of certain affiliated entities which resulted in the recognition of a worthless stock loss of approximately $78.0 million during fiscal year 2017. This revision did not impact the previously reported income tax provision for fiscal year 2017; however, due to the changes enacted in the Tax Cuts and Jobs Act, the manner in which net operating loss carry-forwards are handled did impact the Company's 2018 provision for deferred income taxes previously recorded for the three months ended March 31, 2018 and for the three and six months ended June 30, 2018. The Company revised its provision (benefit) for income taxes for the three months ended March 31, 2018 from an expense of $2.6 million to a benefit of $(1.9) million. The Company also revised its provision (benefit) for income taxes for the three and six months ended June 30, 2018 from an expense of $1.7 million to a benefit of $(0.9) million, and an expense of $4.3 million to a benefit of $(2.9) million, respectively. All of these changes are attributable to changes in deferred tax expense (benefit). The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighted the evidence based on its objectivity. Evidence the Company considered included:
The Company updates the scheduling of the reversal of the consolidated U.S. deferred tax assets and liabilities each quarter, as the deferred tax liabilities have continued to decrease and the Company generated pre-tax losses. Based on the analysis of the above evidence, the Company recorded a reduction of $7.9 million to its valuation allowance during the three months ended September 30, 2018. The Company recognizes, in its consolidated financial statements, the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. During the quarter ended September 30, 2017, management concluded that the Company’s material tax positions require the recording of an ASC 740-10 reserve, with interest and penalties, for uncertain income tax positions as of September 30, 2017. The Company has unrecognized tax positions at December 31, 2017 and September 30, 2018 of $1.1 million and $2.9 million, respectively, that would affect its effective tax rate. The Company does not expect a significant change in the liability for unrecognized tax benefits in the next 12 months. For the three months ended September 30, 2017 and 2018, the Company recognized a tax expense of $3.0 million and $11.7 million, respectively, in the consolidated statements of operations and comprehensive loss. The income tax expense for the three months ended September 30, 2018 was primarily attributable to a federal and state deferred tax expense of $12.9 million due primarily to the different book and tax treatment of goodwill, a federal and state current income tax expense of $0.1 million and a foreign deferred tax expense of $0.3 million, partially offset by a foreign current tax benefit of $1.6 million. The income tax expense for the three months ended September 30, 2017 was primarily attributable to a federal and state deferred tax expense of $1.9 million, federal and state current income taxes of $0.2 million, foreign current tax expense of $0.7 million, and a foreign deferred tax expense of $0.2 million. For the nine months ended September 30, 2017 and 2018, the Company recognized a tax expense of $11.4 million and $8.8 million, respectively, in the consolidated statements of operations and comprehensive loss. The income tax expense for the nine months ended September 30, 2018 was primarily attributable to a federal and state deferred tax expense of $8.9 million , a federal and state current income tax expense of $0.5 million, a foreign deferred tax expense of $0.2 million, partially offset by a foreign current tax benefit of $0.8 million. The income tax expense for the nine months ended September 30, 2017 was primarily attributable to a federal and state deferred tax expense of $7.3 million, federal and state current income taxes of $2.6 million, a foreign current tax expense of $2.3 million, partially offset by a foreign deferred tax benefit of $0.8 million. As of December 31, 2017, the Company had NOL carry-forwards available to offset future U.S. federal taxable income of approximately $236.3 million and future state taxable income of approximately $168.3 million. These NOL carry-forwards expire on various dates through 2037. As of December 31, 2017, the Company had NOL carry-forwards in foreign jurisdictions available to offset future foreign taxable income by approximately $26.7 million. The Company has loss carry-forwards that begin to expire in 2021 in in China totaling $0.7 million. The Company has loss carry-forwards that begin to expire in 2020 in the Netherlands totaling $12.6 million. The Company also has loss carry-forwards in the United Kingdom and Singapore of $13.2 million and $0.2 million, respectively, which have an indefinite carry-forward period. A recent U.K. tax law change provides that U.K. losses can only offset 50% of trading profits incurred after April 1, 2017. In addition, the Company has $3.4 million of U.S. federal capital loss carry-forwards and $1.4 million in state capital loss carry-forwards, generally expiring through 2021. As of December 31, 2017, the Company had U.S. tax credit carry-forwards available to offset future U.S. federal and state taxes of approximately $17.6 million and $12.3 million, respectively. These credit carry-forwards expire on various dates through 2037. Utilization of the NOL carry-forwards may be subject to an annual limitation due to the ownership change rules under Section 382 of the Internal Revenue Code (“Section 382 limitation”). Ownership changes can limit the amount of net operating loss and other tax attributes that a company can use each year to offset future taxable income and taxes payable. Although the Company has experienced a number of ownership changes over time, it currently does not have any Section 382 limitation on its ability to utilize NOL carry-forwards. The Company files income tax returns in the United States for federal income taxes and in various state jurisdictions. The Company also files in several foreign jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities throughout the world. Since the Company is in a loss carry-forward position, it is generally subject to U.S. federal and state income tax examinations by tax authorities for all years for which a loss carry-forward is utilized. One of the Company’s subsidiaries, Constant Contact, Inc., is under audit by the U.S. Internal Revenue Service and the New York City Department of Finance for periods ended December 31, 2015 and February 9, 2016. The Company is also currently under audit in India for fiscal years ended March 31, 2014, 2015 and 2016 and Israel for the fiscal years ended December 31, 2012, 2013, 2014 and 2015. |
Severance and Other Exit Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance and Other Exit Costs | Severance and Other Exit Costs The Company continues to evaluate its data center, sales and marketing, support and engineering operations and the general and administrative function in an effort to optimize its cost structure. As a result, the Company may incur charges for employee severance, exiting facilities and restructuring data center commitments and other related costs. 2018 Restructuring Plan In January 2018, the Company announced plans to eliminate approximately 71 positions, later increased to approximately 95 positions, primarily in the Asia Pacific region and to a lesser extent in the U.S., in order to streamline operations and create operational efficiencies (the "2018 Restructuring Plan"). During the three and nine months ended September 30, 2018, the Company incurred severance costs of $0.1 million and $3.0 million, and paid $0.6 million and $2.4 million, respectively, and had a remaining accrued severance liability of $0.6 million as of September 30, 2018 in connection with the 2018 Restructuring Plan. The Company expects to complete severance charges related to the 2018 Restructuring Plan during the year ending December 31, 2018. 2017 Restructuring Plan In January 2017, the Company announced plans to close certain offices as part of a plan to consolidate certain web presence customer support operations, resulting in severance costs. These severance charges were associated with the elimination of approximately 660 positions, primarily in customer support. Additionally, the Company implemented additional restructuring plans to create operational efficiencies and synergies related to the Constant Contact acquisition, which resulted in additional severance charges for the elimination of approximately 50 positions. During the three and nine months ended September 30, 2018, in connection with these plans (together, the “2017 Restructuring Plan”), the Company recorded severance charges of $0.0 million and $0.0 million, respectively, and paid $0.5 million and $3.3 million, respectively. The Company had a remaining accrued severance liability of $0.4 million as of September 30, 2018. In connection with the 2017 Restructuring Plan, the Company closed offices in Orem, Utah and relocated certain employees to its Tempe, Arizona office. During the three and nine months ended September 30, 2018, the Company recorded an expense of $0.0 million and reductions of $0.2 million, respectively, and paid $0.0 million and $0.1 million, respectively. The Company had a remaining accrued facility liability of $0.0 million as of September 30, 2018. The Company expects to complete severance charges related to the 2017 Restructuring Plan during the year ending December 31, 2018. 2016 Restructuring Plan In connection with the Company’s acquisition of Constant Contact on February 9, 2016, the Company implemented a plan to create operational efficiencies and synergies resulting in severance costs and facility exit costs (the “2016 Restructuring Plan”). The severance charges were associated with the elimination of approximately 265 positions across the business. The Company incurred all employee-related charges associated with the 2016 Restructuring Plan during the year ended December 31, 2016 and all severance payments were complete at December 31, 2017. There is no severance accrual remaining as of September 30, 2018. The 2016 Restructuring Plan included the closure of offices in San Francisco, California, Delray Beach, Florida, New York, New York, Miami, Florida, the United Kingdom and Brazil, and the relocation of certain employees to the Company's Austin, Texas office. The Company also closed a portion of the Constant Contact offices in Waltham, Massachusetts. During the three and nine months ended September 30, 2018, the Company recorded charges of $0.1 million and $0.2 million, respectively. The Company paid $0.5 million and $1.5 million, respectively, of facility costs related to the 2016 Restructuring Plan during the three and nine months ended September 30, 2018. The Company had a remaining accrued facility liability of $4.3 million as of September 30, 2018. The Company completed facility-related charges associated with the 2016 Restructuring Plan during the year ended December 31, 2016, and expects to complete facility exit cost payments related to this plan during the year ending December 31, 2022. Activity of Combined Restructuring Plans The following table provides a summary of the aggregate activity for the nine months ended September 30, 2018 related to the Company’s combined restructuring plans' severance accrual:
The following table provides a summary of the aggregate activity for the nine months ended September 30, 2018 related to the Company’s combined restructuring plans' facilities exit accrual:
The following table presents restructuring charges recorded in the consolidated statements of operations and comprehensive loss for the periods presented:
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, the Company is involved in legal proceedings or subject to claims arising in the ordinary course of its business. The Company is not presently involved in any such legal proceeding or subject to any such claim that, in the opinion of its management, would have a material adverse effect on its business, operating results or financial condition. However, the results of such legal proceedings or claims cannot be predicted with certainty, and regardless of the outcome, can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Neither the ultimate outcome of the Machado and McGee shareholder litigation matters listed below nor an estimate of any probable losses or any reasonably possible losses (other than the reserves specifically discussed below) can be assessed at this time. The Company received a subpoena dated December 10, 2015 from the Boston Regional Office of the SEC, requiring the production of certain documents, including, among other things, documents related to its financial reporting, including operating and non-GAAP metrics, refund, sales and marketing practices and transactions with related parties. On June 5, 2018, the Company announced that it had settled both this investigation and the Constant Contact investigation discussed below by consenting to the SEC's entry of a cease and desist order (the "Order"), without admitting or denying the SEC's findings set forth in the Order, and by paying a civil monetary penalty. The Company accrued the penalty in the fiscal quarter ended September 30, 2017 and paid the penalty in the fiscal quarter ended June 30, 2018. On May 4, 2015, Christopher Machado, a purported holder of the Company’s common stock, filed a civil action in the United States District Court for the District of Massachusetts against the Company and its former chief executive officer and former chief financial officer, captioned Machado v. Endurance International Group Holdings, Inc., et al., Civil Action No. 1:15-cv-11775-GAO. The plaintiff filed an amended complaint on December 8, 2015, and a second amended complaint on March 18, 2016. The Company moved to dismiss the second amended complaint, but before the court ruled on the Company's motion, with the Company's assent, the plaintiff filed a third amended complaint on June 30, 2017. In the third amended complaint, plaintiffs Christopher Machado and Michael Rubin allege claims for violations of Section 10(b) and 20(a) of the Exchange Act, and Sections 11, 12(a)(2), and 15 of the Securities Act, on behalf of a purported class of purchasers of the Company’s securities between October 25, 2013 and December 16, 2015, including persons or entities who purchased or acquired the Company's shares pursuant or traceable to the registration statement and prospectus issued in connection with the Company's October 25, 2013 initial public offering. The plaintiffs challenge as false or misleading certain of the Company’s disclosures about the total number of subscribers, average revenue per subscriber, the number of customers paying over $500 per year for the Company’s products and services, and the average number of products sold per subscriber. The plaintiffs seek, on behalf of themselves and the purported class, compensatory damages, rescissory damages as to class members who purchased shares pursuant to the offering and the plaintiffs' costs and expenses of litigation. The Company moved to dismiss the third amended complaint on August 29, 2017. The plaintiffs' memorandum in opposition to the Company's motion to dismiss was filed on October 30, 2017, and the Company's reply memorandum was filed on December 14, 2017. On January 12, 2018, the parties filed a joint motion to stay all proceedings pending the outcome of a mediation between the parties scheduled for February 23, 2018. The court granted the stay on February 21, 2018. The parties did not resolve the matter at the mediation on February 23, 2018, but continued thereafter to productively discuss a potential resolution of this matter. The court extended the stay to allow the parties to continue their discussions. On May 17, 2018, the parties executed a term sheet memorializing their agreement in principal to settle the action. The parties then negotiated the terms and conditions of a stipulation and agreement of settlement and related papers, which provide for the release of all claims asserted against the Company and its former chief executive officer and former chief financial officer. On July 6, 2018, the plaintiffs filed an unopposed motion seeking preliminary approval of the proposed settlement, certification of the proposed settlement class for settlement purposes only, and approval of notice to the settlement class. The court has not yet ruled on this motion. The Company's contribution to the settlement pool under the proposed settlement would be approximately equal to the amount it reserved in connection with a possible settlement of this action. The aggregate amount of this reserve and the reserve for the Constant Contact McGee litigation discussed below was originally $8.5 million recorded during the three months ended March 31, 2018, and subsequently adjusted to $8.3 million during the three months ended June 30, 2018 and to $7.3 million during the three months ended September 30, 2018. The Company cannot make any assurances as to whether or when the settlement will be approved by the court. Constant Contact On February 9, 2016, the Company acquired all of the outstanding shares of common stock of Constant Contact. On December 10, 2015, Constant Contact received a subpoena from the Boston Regional Office of the SEC, requiring the production of documents pertaining to Constant Contact’s sales, marketing, and customer retention practices, as well as periodic public disclosure of financial and operating metrics. As discussed above, on June 5, 2018, the Company announced that it had settled both this investigation and the Endurance investigation discussed above by consenting to the SEC's entry of the Order, without admitting or denying the SEC's findings set forth in the Order, and by paying a civil monetary penalty. The Company accrued the penalty in its fiscal quarter ended September 30, 2017 and paid the penalty in the fiscal quarter ended June 30, 2018. On August 7, 2015, a purported class action lawsuit, William McGee v. Constant Contact, Inc., et al, was filed in the United States District Court for the District of Massachusetts against Constant Contact and two of its former officers. An amended complaint, which named an additional former officer as a defendant, was filed December 19, 2016. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Exchange Act, and is premised on allegedly false and/or misleading statements, and non-disclosure of material facts, regarding Constant Contact’s business, operations, prospects and performance during the proposed class period of October 23, 2014 to July 23, 2015. The parties mediated the claims on March 27, 2018, and as a result of that mediation reached an agreement in principle with the lead plaintiff to settle the action. The parties then negotiated the terms and conditions of a stipulation and agreement of settlement and related papers, which provide for the release of all claims asserted against Constant Contact and its former officers. On May 18, 2018, the plaintiffs filed an unopposed motion seeking preliminary approval of the proposed settlement, certification of the proposed settlement class for settlement purposes only, and approval of notice to the settlement class. The court has not yet ruled on this motion. The Company's contribution to the settlement pool under the proposed settlement would be approximately equal to the amount it reserved in connection with a possible settlement of this action. The aggregate amount of this reserve and the reserve for the Endurance Machado litigation discussed above was originally $8.5 million recorded during the three months ended March 31, 2018, and subsequently adjusted to $8.3 million during the three months ended June 30, 2018 and to $7.3 million during the three months ended September 30, 2018. The Company cannot make any assurances as to whether or when the settlement will be approved by the court. |
Related Party Transactions |
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Related Party Transactions | Related Party Transactions The Company has various agreements in place with related parties. Below are details of significant related party transactions that occurred during the three and nine months ended September 30, 2017 and 2018. Tregaron: The Company has contracts with Tregaron India Holdings, LLC and its affiliates, including Diya Systems (Mangalore) Private Limited, Glowtouch Technologies Pvt. Ltd. and Touchweb Designs, LLC (collectively, “Tregaron”), for outsourced services, including email- and chat-based customer and technical support, network monitoring, engineering and development support and web design and web building services, and an office space lease. These entities are owned directly or indirectly by family members of the Company’s former chief executive officer, who is also a holder of more than 5.0% of the Company's capital stock. The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive loss for the periods presented relating to services provided by Tregaron and its affiliates under these agreements:
As of December 31, 2017, approximately $1.5 million was included in accounts payable and accrued expense relating to services provided by Tregaron. As of September 30, 2018, approximately $2.2 million was included in accounts payable and accrued expense relating to services provided by Tregaron. Innovative Business Services, LLC: The Company also has agreements with Innovative Business Services, LLC (“IBS”), which provides multi-layered third-party security and website performance applications that are sold by the Company. During the three months ended September 30, 2018, a director of the Company and the Company’s former chief executive officer, who is a holder of more than 5.0% of the Company's capital stock, continued to hold a material financial interest in IBS. During the quarter ended March 31, 2017, the Company’s principal agreement with this entity was amended to permit the Company to purchase a specific IBS website performance product at no charge, and in exchange, to increase the revenue share to IBS on certain website performance products. The Company records revenue on the sale of IBS products on a net basis, since the Company views IBS as the primary obligor to deliver these services. As a result, the revenue share paid by the Company to IBS is recorded as contra-revenue. Further, IBS pays the Company a fee on sales made by IBS directly to customers of the Company. The Company records these fees as revenue. The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive loss for the periods presented relating to services provided by IBS and its affiliates under these agreements:
As of December 31, 2017 and September 30, 2018, approximately $0.2 million and $0.1 million, respectively, was included in prepaid expenses and other current assets relating to the Company’s agreements with IBS. As of December 31, 2017 and September 30, 2018, approximately $1.3 million and $1.2 million, respectively was included in accounts payable and accrued expense relating to the Company’s agreements with IBS. As of December 31, 2017 and September 30, 2018, approximately $0.7 million and $1.0 million, respectively, was included in accounts receivable relating to the Company’s agreements with IBS. Goldman, Sachs & Co.: The Company entered into a three-year interest rate cap on December 9, 2015 with a subsidiary of Goldman, Sachs & Co. ("Goldman"). The Company paid $3.0 million to the Goldman subsidiary as a premium for the interest rate cap during the year ended December 31, 2016. No further premiums are payable under this interest rate cap. Goldman is a significant stockholder of the Company. Refer to Note 6: Fair Value Measurements, for further details. Goldman Sachs Lending Partners LLC, a subsidiary of Goldman, was one of the joint bookrunners and joint lead arrangers for the 2017 Refinancing and the 2018 Refinancing. In that capacity, Goldman Sachs Lending Partners LLC received an arrangement fee of $0.5 million and $0.3 million, respectively, and was reimbursed for an immaterial amount of expenses. |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the CODM. The Company experienced significant changes in its management structure during fiscal year 2017, including a change in its chief executive officer, who is the Company's CODM. The Company's leadership structure has been revised to centralize management of certain domain-focused brands in order to improve overall performance. As a result of these management changes, management has revised internal financial reporting structures, and broken the former web presence segment into two reportable segments, web presence and domains. The Company's third reportable segment, email marketing, remains unchanged. The products and services included in each of the three reportable segments are as follows: Web Presence. The web presence segment consists primarily of the Company's web hosting brands, such as Bluehost and HostGator, and related products such as domain names, website security, website design tools and services, and e-commerce products. Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to the web presence segment. Email marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the Company's SinglePlatform digital storefront solution. The Company measures profitability of these segments based on revenue, gross profit, and adjusted EBITDA. The accounting policies of each segment are the same as those described in the summary of significant accounting policies; please refer to Note 2: Summary of Significant Accounting Policies, for further details. The following tables contain financial information for each reportable segment for the three and nine months ended September 30, 2017 and 2018:
The CODM does not use asset information to allocate resources or make operating decisions. The Company has revised amounts reported for gross profit, net loss and adjusted EBITDA for the web presence and the domain segments in the segment disclosures, which impacted fiscal years 2016 and 2017. The amounts reported for the email marketing segment were not impacted. The revisions arose because of an error in the classification of certain domain registration expenses. Domain segment gross profit, net income (loss) and adjusted EBITDA were overstated by $3.0 million for fiscal year 2016, and by $6.9 million for fiscal year 2017, and web presence segment gross profit, net income (loss) and adjusted EBITDA were understated by equal amounts. Consolidated results were not impacted by this misstatement. The following table reflects the differences between the amounts as reported and the amounts as revised for gross profit, net loss and adjusted EBITDA for the web presence and domain segments for the three and nine months ended September 30, 2017:
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company evaluated all subsequent events occurring through November 2, 2018 to determine if any such events should be reflected in these financial statements. There were no material recognized subsequent events recorded in the September 30, 2018 financial statements. |
Supplemental Guarantor Financial Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Guarantor Financial Information | Supplemental Guarantor Financial Information In February 2016, EIG Investors Corp., a wholly-owned subsidiary of the Company (the “Issuer”), issued $350.0 million aggregate principal amount of its 10.875% Senior Notes due 2024 (refer to Note 10: Notes Payable in the consolidated financial statements), which it exchanged for new 10.875% Senior Notes due 2024 pursuant to a registration statement on Form S-4. The registered exchange offer for the Senior Notes was completed on January 30, 2017. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company, and the following wholly-owned subsidiaries: The Endurance International Group, Inc., Bluehost Inc., FastDomain Inc., Domain Name Holding Company, Inc., Endurance International Group – West, Inc., HostGator.com LLC, A Small Orange, LLC, Constant Contact, Inc., and SinglePlatform, LLC, (collectively, the “Subsidiary Guarantors”), subject to certain customary guarantor release conditions. The Company’s other domestic subsidiaries and its foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) have not guaranteed the Senior Notes. The Company sold two immaterial guarantors, CardStar, Inc. and CardStar Publishing, LLC (collectively, "CardStar"), during the quarter ended December 31, 2016. CardStar was released and discharged from the guarantee as a result of the sale and no longer guarantees the debt of the Company as of December 1, 2016. Proceeds from the sale of CardStar were approximately $0.1 million. The following tables present supplemental condensed consolidating balance sheet information of the Company (“Parent”), the Issuer, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as of December 31, 2017 and September 30, 2018, supplemental condensed consolidating results of operations for the three and nine months ended September 30, 2017 and 2018, and cash flow information for the nine months ended September 30, 2017 and 2018: Condensed Consolidating Balance Sheets December 31, 2017 (in thousands)
Condensed Consolidating Balance Sheets September 30, 2018 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Three Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Nine Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Three Months Ended September 30, 2018 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Nine Months Ended September 30, 2018 (in thousands)
Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2018 (in thousands)
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Preparation | Basis of Preparation The accompanying consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared using accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions were eliminated on consolidation. |
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Segment Information | Segment Information From the fourth quarter of fiscal year 2016, through the third quarter of fiscal year 2017, the Company had two reportable segments, web presence and email marketing. The Company experienced significant changes in its management structure during fiscal year 2017, including a change in its chief executive officer, who is the Company's chief operating decision maker ("CODM"). The Company's leadership structure has been revised to centralize management of certain domain-focused brands in order to improve overall performance. As a result of these management changes, management has revised internal financial reporting structures, and broken the former web presence segment into two reportable segments, web presence and domains. The Company's third reportable segment, email marketing, remains unchanged. The products and services included in each of the three reportable segments are as follows: Web Presence. The web presence segment consists primarily of the Company's web hosting brands, such as Bluehost and HostGator, and related products such as domain names, website security, website design tools and services, and e-commerce products. Domain. The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to the web presence segment. Email Marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the SinglePlatform digital storefront solution. The Company's segments share certain resources, primarily related to sales and marketing, engineering and general and administrative functions. Management allocates these costs to each respective segment based on a consistently applied methodology, primarily based on a percentage of revenue. |
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Use of Estimates | Use of Estimates U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, judgments and assumptions used in preparing the accompanying consolidated financial statements are based on the relevant facts and circumstances as of the date of the consolidated financial statements. Although the Company regularly assesses these estimates, judgments and assumptions used in preparing the consolidated financial statements, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. The more significant estimates reflected in these consolidated financial statements include estimates of fair value of assets acquired and liabilities assumed under purchase accounting related to the Company’s acquisitions and when evaluating goodwill and long-lived assets for potential impairment, the estimated useful lives of intangible and depreciable assets, revenue recognition for multiple-element arrangements, stock-based compensation, contingent consideration, derivative instruments, certain accruals, reserves and deferred taxes. |
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Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying interim consolidated balance sheet as of September 30, 2018, and the related consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2018, cash flows for the nine months ended September 30, 2017 and 2018, and the notes to consolidated financial statements are unaudited. These unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the Company’s financial position at September 30, 2018, results of operations for the three and nine months ended September 30, 2017 and 2018 and cash flows for the nine months ended September 30, 2017 and 2018. The consolidated results in the consolidated statements of operations and comprehensive loss are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2018. |
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Cash Equivalents | Cash Equivalents Cash and cash equivalents include all highly liquid investments with remaining maturities of three months or less at the date of purchase. |
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Restricted Cash | Restricted Cash Restricted cash is composed of certificates of deposit and cash held by merchant banks and payment processors, which provide collateral against any chargebacks, fees, or other items that may be charged back to the Company by credit card companies and other merchants, and collateral for certain facility leases. |
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Accounts Receivable | Accounts Receivable Accounts receivable is primarily composed of cash due from credit card companies for unsettled transactions charged to subscribers’ credit cards. As these amounts reflect authenticated transactions that are fully collectible, the Company does not maintain an allowance for doubtful accounts. The Company also accrues for earned referral fees and commissions, which are governed by reseller or affiliate agreements, when the amount is reasonably estimable. |
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Prepaid Domain Name Registry Fees | Prepaid Domain Name Registry Fees Prepaid domain name registry fees represent amounts that are paid in full at the time a domain is registered by one of the Company’s registrars on behalf of a customer. The registry fees are recognized on a straight-line basis over the term of the domain registration period. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and certain accrued expenses, approximate their fair values due to their short maturities. The fair value of the Company's notes payable is based on the borrowing rates currently available to the Company for debt with similar terms and average maturities and approximates their carrying value. |
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Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities FASB Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, or ASC 815, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance in FASB Accounting Standards Update ("ASU") 2011-4, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. |
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Property and Equipment | Property and Equipment Property and equipment is recorded at cost or fair value if acquired in an acquisition. The Company also capitalizes the direct costs of constructing additional computer equipment for internal use, as well as upgrades to existing computer equipment which extend the useful life, capacity or operating efficiency of the equipment. Capitalized costs include the cost of materials, shipping and taxes. Materials used for repairs and maintenance of computer equipment are expensed and recorded as a cost of revenue. Materials on hand and construction-in-process are recorded as property and equipment. Assets recorded under capital lease are depreciated over the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:
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Software Development Costs | Software Development Costs The Company accounts for software development costs for internal-use software under the provisions of ASC 350-40, Internal-Use Software. Accordingly, certain costs to develop internal-use computer software are capitalized, provided these costs are expected to be recoverable. |
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Goodwill | Goodwill Goodwill relates to amounts that arose in connection with the Company’s various business combinations and represents the difference between the purchase price and the fair value of the identifiable intangible and tangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for impairment. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the equity value of the Company's business, a significant adverse change in agreements that would materially affect reported operating results, business climate or operational performance of the business and an adverse action or assessment by a regulator. Additionally, a reorganization or change in the number of reporting units could result in the reassignment of goodwill between reporting units and may trigger an impairment assessment. In accordance with ASC 350, Intangibles—Goodwill and Other, or ASC 350, the Company is required to review goodwill by reporting unit for impairment at least annually or more often if there are indicators of impairment present. Under U.S. GAAP, a reporting unit is either the equivalent of, or one level below, an operating segment. The Company has historically performed its annual goodwill test as of December 31 of each fiscal year. As a result of changes in the Company’s management structure during fiscal year 2017, including the change in its chief executive officer / CODM, the Company has revised its internal financial reporting structure, which has resulted in a change to its reporting units. The Company has identified a total of ten reporting units under the new structure. With the increase in reporting units, the Company determined that more time would be required to perform future goodwill impairment tests, and as a result, decided to accelerate its annual goodwill impairment test date to October 31 of each fiscal year, starting with the fiscal year 2017 test. Before testing goodwill at October 31, 2017, the Company allocated assets and liabilities to their respective reporting units. Goodwill was allocated to each reporting unit in accordance with ASC 350-20-40, which requires that goodwill be allocated based on the relative fair values of each reporting unit. After completing this valuation process, the Company allocated goodwill to seven reporting units. The Company did not allocate any goodwill to three smaller reporting units that were determined to have no material fair value. The carrying value of each reporting unit is based on the assignment of the appropriate assets and liabilities to each reporting unit. Assets and liabilities were assigned to each reporting unit if the assets or liabilities are employed in the operations of the reporting unit and the asset and liability is considered in the determination of the reporting unit fair value. Certain assets and liabilities are shared by multiple reporting units, and were allocated to each reporting unit based on the relative size of a reporting unit, primarily based on revenue. The fair value of each reporting unit is determined by the income approach. The Company also compared the fair value from the income approach to a market based approach to validate that the value derived from the income approach was reasonable. For the income approach, fair value is determined based on the present value of estimated future after-tax cash flows, discounted at an appropriate risk adjusted rate. The Company uses internal forecasts to estimate future after-tax cash flows, which includes an estimate of long-term future growth rates based on the long-term outlook for each reporting unit. Actual results may differ from those assumed in each forecast. The Company derives discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the weighted average cost of capital. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the business and in internally developed forecasts. For fiscal year 2017, the Company used a discount rate of 10.0%, and also performed sensitivity analysis on the discount rates. For the market approach validation, values were derived based on valuation multiples from sales of comparable companies. The Company has also early adopted the provisions of ASU 2017-4, which eliminates the second step of the goodwill impairment test. As a result, the goodwill impairment test as of October 31, 2017 includes only one step, which is a comparison of the carrying value of each reporting unit to its fair value, and any excess carrying value, up to the amount of goodwill allocated to that reporting unit, is impaired. The goodwill impairment test as of October 31, 2017 resulted in a $12.1 million impairment of goodwill to the Company's domain monetization reporting unit within the domain segment. The impairment is a direct result of a more rapid decline in domain parking revenue than originally expected, and to a lesser extent, reduced sales of premium domain names. Goodwill for this reporting unit has been completely impaired. Goodwill allocated to the other six reporting units was not impaired. |
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Long-Lived Assets | Long-Lived Assets The Company’s long-lived assets consist primarily of intangible assets, including acquired subscriber relationships, trade names, intellectual property, developed technology, domain names available for sale and in-process research and development (“IPR&D”). The Company also has long-lived tangible assets, primarily consisting of property and equipment. The majority of the Company’s intangible assets are recorded in connection with its various acquisitions. The Company’s intangible assets are recorded at fair value at the time of their acquisition. The Company amortizes intangible assets over their estimated useful lives. Determination of the estimated useful lives of the individual categories of intangible assets is based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with finite lives other than developed technology is recognized in accordance with their estimated projected cash flows. The Company evaluates long-lived intangible and tangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment are present and undiscounted future cash flows are less than the carrying amount, the fair value of the assets is determined and compared to the carrying value. If the fair value is less than the carrying value, then the carrying value of the asset is reduced to the estimated fair value and an impairment loss is charged to expense in the period the impairment is identified. During the three and nine months ended September 30, 2017, the Company recognized an impairment charge of $13.8 million relating to certain domain name intangible assets acquired in 2014, which was recorded in cost of revenue in the consolidated statements of operations and comprehensive loss. The impairment resulted from diminished cash flows associated with this intangible asset. No such impairment losses have been identified in the three and nine months ended September 30, 2018. Indefinite life intangible assets include domain names that are available for sale which are recorded at cost to acquire. These assets are not being amortized and are being tested for impairment annually and whenever events or changes in circumstance indicate that their carrying value may not be recoverable. When a domain name is sold, the Company records the cost of the domain in cost of revenue. |
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Acquired In-Process Research and Development (IPR&D) | Acquired In-Process Research and Development (IPR&D) Acquired IPR&D represents the fair value assigned to research and development assets that the Company acquires in connection with business combinations that have not been completed at the date of acquisition. The acquired IPR&D is capitalized as an intangible asset and reviewed on a quarterly basis to determine future use. Any impairment loss of the acquired IPR&D is charged to expense in the period the impairment is identified. |
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Revenue Recognition | Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09 or ASC 606, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Since then, the FASB has also issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principals versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, and ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which further elaborate on the original ASU No. 2014-09. The Company adopted the guidance in ASC 606 on January 1, 2018. Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to for those products and services. In general, the Company determines revenue recognition through the following steps:
The Company provides cloud-based subscription services, which include website hosting and related add-ons, search engine optimization (SEO) services, domain registration services and email marketing. Website hosting gives subscribers access to an environment where the Company hosts a customer’s website. The related contract terms are generally for one year, but can range from 30 days to 3 years. Website hosting services are typically sold in bundled offerings that include website hosting, domain registration services and various add-ons. The Company recognizes revenue for website hosting and domain registration services over the term of the contract. The main add-on services related to website hosting are domain privacy, secure sockets layer (SSL) security, site backup and restoration, and website builder tools. These services may be included in website hosting bundles, or they may be purchased on a standalone basis. Certain add-on services are provided by third parties. In cases where the Company is acting as an agent for the sale of third party add-on services, the Company recognizes revenue on a net basis at the time of sale. In cases where the Company is acting as a principal for the sale of third party add-on services (i.e., the Company has the primary responsibility to provide specific goods or services, it has discretion to establish prices and it may assume inventory risk), the Company recognizes revenue on a gross basis over the term of the contract. The revenue for Company-provided add-on services is primarily recognized over the term of the contract. SEO services are monthly subscriptions that provide a customer with increased traffic to their website over the term of the subscription. Revenue from SEO services is recognized over the monthly term of the contract. In the case of domain registration services, the Company is an accredited registrar and can provide registration services to the customer, or it can select an accredited third party registrar to perform these duties. Domain registration services are generally annual subscriptions, but can cover multiple years. Revenue for these services is recognized over time. Email marketing services provide subscribers with a cloud based platform that can send broadcast emails to a customer list managed by the subscriber. Pricing is based on contract list volume from the prior monthly period, which determines the contractual billing price for the upcoming month. Revenue for this service is recognized over the monthly term of the contract. Non-subscription based services include certain professional services, primarily website design or re-design services, marketing development fund revenue ("MDF"), premium domain names and domain parking services. Website design and re-design services are recognized when the service is complete. Marketing development funds consist of commissions earned by the Company when a third party sells its products or services directly to the Company’s subscribers, and advertising revenue for third party ads placed on Company websites. The Company records revenue when the service is provided and calculates it based on the contractual revenue share arrangement or over the term of the advertisement. Domain parking allows the Company to monetize certain of its premium domain names by loaning them to specialized third parties that generate advertising revenue from these parked domains on a pay per click ("PPC") basis. Revenue is recognized when earned and calculated based on the revenue share arrangement with the third party. Revenue from the sale of premium domains is recognized when persuasive evidence of an arrangement to sell such domains exists and delivery of an authorization key to access the domain name has occurred. Premium domain names are paid for in advance prior to the delivery of the domain name. For most of the Company’s performance obligations, the customer simultaneously receives and consumes the service over a period of time as the Company performs the service, resulting in the recognition of revenue over the subscription period. This method provides an appropriate depiction of the timing of the transfer of services to the customer. In limited instances, the customer obtains control of the promised service at a point in time, with no future obligations on the part of the Company. In these instances, the Company recognizes revenue at the point in time control is transferred. The contracts that the Company enters into typically do not contain any variable or non-cash considerations. The Company maintains a reserve for refunds and chargebacks related to revenue that has been recognized and is expected to be refunded, as calculated based on observed historical trends. The Company had a refund and chargeback reserve of $0.5 million and $0.3 million as of December 31, 2017 and September 30, 2018, respectively. The portion of deferred revenue that is expected to be refunded at December 31, 2017 and September 30, 2018 was $1.8 million and $1.8 million, respectively. Based on refund history, approximately 83% of all refunds happen in the same fiscal month that the contract starts or renews, and approximately 96% of all refunds happen within 45 days of the contract start or renewal date. The Company did not apply any practical expedients during its adoption of ASC 606. The Company elected to use the portfolio method in the calculation of the deferred contract assets. Contracts with Multiple Performance Obligations A considerable amount of the Company’s revenue is generated from transactions that are contracts with customers that may include hosting plans, domain name registrations, and other cloud-based products and services. In these cases, the Company determines whether the products and services are distinct performance obligations that should be accounted for separately versus together. The Company allocates revenue to each performance obligation based on its relative standalone selling price, generally based on the price charged to customers. Hosting services, domain name registrations, and other cloud-based products and services have distinct performance obligations and are often sold separately. If the promise is not distinct and therefore not a performance obligation, then the total transaction amount is allocated to the identified performance obligation based on a relative selling price hierarchy. When multiple performance obligations are included in a contract, the total transaction amount for the contract is allocated to the performance obligations based on a relative selling price hierarchy. The Company determines the relative selling price for a performance obligation based on standalone selling price (“SSP”). The Company determines SSP by considering its observed standalone selling prices, competitive prices in the marketplace and management judgment; these standalone selling prices may vary depending upon the particular facts and circumstances related to each deliverable. The Company analyzes the standalone selling prices used in its allocation of transaction amount, at a minimum, on a quarterly basis. Deferred Revenue The Company records deferred revenue when cash payments are received or are due in advance of the Company’s performance, including amounts that are refundable. The change in the deferred revenue balance for the nine months ended September 30, 2018 is primarily driven by cash payments received or due in advance of the Company satisfying its performance obligations, offset by $331.9 million of revenue recognized that were included in the deferred revenue balance at the beginning of the period. The following table provides a reconciliation of the Company's deferred revenue as of September 30, 2018:
The difference between the opening and closing balances of the Company’s deferred liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the nine months ended September 30, 2018, the Company recognized $331.9 million and $0.0 million, respectively, from beginning deferred revenue current and long-term balances existing at December 31, 2017. The Company did not recognize any revenue from performance obligations satisfied in prior periods. The following table provides the remaining performance obligation amounts as of September 30, 2018. These amounts are equivalent to the ending deferred revenue balance of $477.0 million, which includes both short and long-term amounts:
This backlog of revenue related to future performance obligations is prepaid by customers and supported by executed contracts with customers. The Company has established a reserve of $0.3 million for refunds and chargebacks, 96% of which is expected to materialize in the first 45 days. The remainder of the deferred revenue is expected to be recognized in future periods. Deferred Customer Acquisition Costs As a result of the implementation of ASC 606, the Company now capitalizes the incremental costs directly related to obtaining and fulfilling a contract (such as sales commissions and certain direct sales and marketing success based costs), if these costs are expected to be recovered. These costs are amortized over the period the services are transferred to the customer, which is estimated based on customer churn rates for various segments of the business. The Company includes only those incremental costs that would not have been incurred if the contracts had not been entered into:
As of September 30, 2018, the Company has a total of $71.0 million in deferred assets relating to costs incurred to obtain or fulfill contracts in its web presence segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $71.0 million of recoverable, specific, success-based sales commissions. As of September 30, 2018, the Company has a total of $11.4 million deferred assets relating to costs incurred to obtain or fulfill contracts in its email marketing segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $11.4 million of recoverable, specific, success-based sales commissions. As of September 30, 2018, the Company has a total of $1.4 million deferred assets relating to costs incurred to obtain or fulfill contracts in its domain segment, consisting of $0.0 million of incremental, recoverable sales and marketing costs, and $1.4 million of recoverable, specific, success-based sales commissions. During the nine months ended September 30, 2018, the Company recognized total amortization costs related to the above items of $34.5 million, $3.4 million, and $0.3 million in its web presence, email marketing and domain segments, respectively. Significant Judgments The Company sells a number of third party cloud based services to enhance a subscriber’s overall website hosting experience. The Company exercises considerable judgment to determine if it is the principal or agent in each of these arrangements, and in some instances, has concluded that it is an agent of the third party and recognizes revenue at time of subscriber purchase in an amount that is net of the revenue share payable to the third party. The Company exercises judgment to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the standalone selling price using information that may include a competitive market assessment approach and other observable inputs. The Company typically has more than one standalone selling price for individual products and services. Judgment is required to determine whether particular types of sales and marketing costs incurred, including commissions, are incremental and recoverable costs incurred to obtain and fulfill the customer contract. In addition, judgment is required to determine the life of the customer over which deferred customer acquisition costs are amortized. |
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Income Taxes | Income Taxes Income taxes are accounted for in accordance with ASC 740, Accounting for Income Taxes, or ASC 740. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is more likely than not to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company had unrecognized tax benefits at December 31, 2017 and September 30, 2018 of $1.1 million and $2.9 million, respectively. The Company records interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. |
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Stock-Based Compensation | Stock-Based Compensation The Company may issue restricted stock units, restricted stock awards and stock options which vest upon the satisfaction of a performance condition and/or a service condition. The Company follows the provisions of ASC 718, Compensation—Stock Compensation, or ASC 718, which requires employee stock-based payments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods, net of estimated forfeitures. The Company uses the straight-line amortization method for recognizing stock-based compensation expense. In addition, for stock-based awards where vesting is dependent upon achieving certain performance goals, the Company estimates the likelihood of achieving the performance goals against established performance targets. The Company estimates the fair value of employee stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of highly subjective estimates and assumptions. For restricted stock awards and restricted stock units granted, the Company estimates the fair value of each restricted stock award or restricted stock unit based on the closing trading price of its common stock on the date of grant. |
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Net Loss per Share | Net Loss per Share The Company considered ASC 260-10, Earnings per Share, or ASC 260-10, which requires the presentation of both basic and diluted earnings per share in the consolidated statements of operations and comprehensive loss. The Company’s basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and, if there are dilutive securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements - Recently Adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Since then, the FASB has also issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principals versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, and ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which further elaborate on the original ASU No. 2014-09. The core principle of these updates is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgments and estimates may be required within the revenue recognition process than are required under previous U.S. GAAP. In July 2015, the FASB approved a one-year deferral of the effective date to January 1, 2018, with early adoption to be permitted as of the original effective date of January 1, 2017. Once this standard became effective, companies may use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures) (the "modified retrospective approach"). The Company adopted this guidance on January 1, 2018 using the modified retrospective approach. The new standard impacted the timing of when certain sales incentive payments, primarily to external parties, are charged to expense as these costs must now be deferred over the life of the related customer relationship, whereas previously these amounts were expensed as incurred. In addition, a small portion of the Company's revenue recognition was impacted by this new guidance. The impact to opening retained earnings as a result of the adoption of the new guidance was $59.4 million, which consists of an $83.4 million deferred asset relating to customer acquisition costs and a $6.1 million deferred asset for domain registration costs, partially offset by a $23.1 million liability for deferred revenue, net of a deferred tax liability of $7.0 million. The Company applied the new guidance to all revenue contracts and did not use any practical expedients. The adoption of Topic 606 impacted the results of operations and certain balance sheet accounts. The impact of applying Topic 606 on the results for reporting periods and balance sheet beginning after January 1, 2018 is presented under Topic 606, while prior amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605. The impact of applying Topic 606 as of September 30, 2018 is as follows:
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This new standard enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. This new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's statement of cash flows. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This new standard clarifies certain statement of cash flow presentation issues. This amendment is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's statement of cash flows. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. This new standard eliminates step two of the prior goodwill test, and instead requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 31, 2019, and should be applied on a prospective basis. The Company elected to early adopt the provisions of ASU 2017-04 effective in the fourth quarter of fiscal year 2017, which simplified the process of calculating the $12.1 million impairment to goodwill during the fourth quarter of fiscal year 2017. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718). This new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This amendment is effective for annual or interim periods in fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. The Company adopted this guidance as of January 1, 2018 and will apply this guidance to any modifications, based on the new definition of a modification, for all periods beginning on or after January 1, 2018. During the three and nine months ended September 30, 2018, there were no modifications that would impact the Company's consolidated financial statements. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This new guidance better aligns an entity's risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and to the method of presenting hedge results. The amendments in this guidance require an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported, to allow users to better understand the results and costs of an entity's hedging program. This new guidance is effective for fiscal years beginning after December 15, 2019 and early adoption is allowed. The amended presentation and disclosure guidance is required only prospectively, while the measurement guidance should be applied to hedges existing at the time of adoption through a one-time cumulative-effect adjustment to accumulated other comprehensive income with respect to the elimination of the separate measurement of ineffectiveness with a corresponding adjustment to the opening balance of the retained earnings. The Company adopted this guidance on June 1, 2018 using the modified retrospective approach. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements. Recent Accounting Pronouncements - Recently Issued In February 2016, the FASB issued ASU No. 2016-02, Leases. Since then, the FASB has also issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which further clarifies ASU No. 2016-02 and corrects unintended application of guidance. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of its pending adoption of the new standard on its consolidated financial statements, but expects that the adoption will materially increase its assets and liabilities. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. This new standard improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This amendment is effective for annual periods beginning after December 15, 2018, and early adoption is permitted. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718). The new guidance expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in ASU No. 2018-07 specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards to a non-employee. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contract with Customers. The new guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted, provided the company has already adopted the guidance in Topic 606. A company should only remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the company is required to measure these nonemployee awards at fair value as of the adoption date. The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Estimated Useful Lives | Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:
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Contract with Customer, Asset and Liability | The Company includes only those incremental costs that would not have been incurred if the contracts had not been entered into:
The following table provides a reconciliation of the Company's deferred revenue as of September 30, 2018:
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | These amounts are equivalent to the ending deferred revenue balance of $477.0 million, which includes both short and long-term amounts:
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The impact of applying Topic 606 as of September 30, 2018 is as follows:
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Summary of Calculation of Basic and Diluted Net Loss Per Share |
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Summary of Weighted Average Potentially Dilutive Shares Excluded From Calculation of Diluted Loss Per Share | The following number of weighted average potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been anti-dilutive:
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Correction of Income Tax Expense - Fiscal Year 2018 (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections | The following table represents the impact of the revised deferred income tax provision on the impacted lines of the statement of cash flows for the periods shown (in thousands):
The following table represents the impact of the income statement revision to the first and second quarters of 2018 due to the revised deferred income tax provision (in thousands, except per share data):
The following table represents the impact of the revised deferred income tax provision on the impacted balance sheet accounts as of the dates shown (in thousands):
The following table reflects the differences between the amounts as reported and the amounts as revised for gross profit, net loss and adjusted EBITDA for the web presence and domain segments for the three and nine months ended September 30, 2017:
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Property and Equipment and Capital Lease Obligations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Property and Equipment | Components of property and equipment consisted of the following:
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Fair Value Measurements | Basis of Fair Value Measurements
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Goodwill and Other Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Goodwill Balances | The following table summarizes the changes in the Company’s goodwill balances from December 31, 2017 to September 30, 2018:
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Summary of Other Intangible Assets | At December 31, 2017, other intangible assets consisted of the following:
At September 30, 2018, other intangible assets consisted of the following:
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Notes Payable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | At December 31, 2017 and September 30, 2018, notes payable, net of original issuance discounts (sometimes referred to as "OID") and deferred financing costs, consisted of the following:
As of December 31, 2017 and September 30, 2018, the Senior Notes had an outstanding balance of:
As of September 30, 2018, the 2018 Term Loan had an outstanding balance of:
As of December 31, 2017 and September 30, 2018, the 2017 Term Loan had an outstanding balance of:
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Summary of Future Debt Maturities | The maturity of the notes payable at September 30, 2018 is as follows:
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Summary of Interest Rates and Interest Expense | The following table provides a summary of interest rates and interest expense for the three and nine months ended September 30, 2017 and 2018:
* The Company did not have debt bearing interest based on the alternate base rate for the three and nine months ended September 30, 2017 and 2018. |
Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Stockholders' Equity | The following table presents the changes in total stockholders’ equity during the nine months ended September 30, 2018:
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Stock-Based Compensation (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Total Stock-Based Compensation Expense | The following table presents total stock-based compensation expense recorded in the consolidated statement of operations and comprehensive loss for all awards granted under the Company’s 2013 Plan and 2011 Plan:
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Summary of Stock Options | The following table provides a summary of the Company’s stock options as of September 30, 2018 and the stock option activity for all stock options granted under the 2013 Plan during the nine months ended September 30, 2018:
The following table provides a summary of the Company’s stock options as of September 30, 2018 and the stock option activity for all stock options granted under the 2011 Plan during the nine months ended September 30, 2018:
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Summary of Restricted Stock Awards and Restricted Stock Units | The following table provides a summary of the Company’s restricted stock unit activity for the 2011 Plan during the nine months ended September 30, 2018:
The following table provides a summary of the Company’s restricted stock unit activity for the 2013 Plan during the nine months ended September 30, 2018:
The following table provides a summary of the Company’s restricted stock award activity for the 2013 Plan during the nine months ended September 30, 2018:
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Accumulated Other Comprehensive Income (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income | The following table presents the components of accumulated other comprehensive income (loss):
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Revenue (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table presents disaggregated revenues by category for the three and nine months ended September 30, 2018:
Revenue, classified by the major geographic areas in which the Company’s customers are located, was as follows for the three and nine months ended September 30, 2018:
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Severance and Other Exit Costs (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Aggregate Activity Related to Company's Facilities Exit Costs Accrual and Severance Accrual | The following table provides a summary of the aggregate activity for the nine months ended September 30, 2018 related to the Company’s combined restructuring plans' facilities exit accrual:
The following table provides a summary of the aggregate activity for the nine months ended September 30, 2018 related to the Company’s combined restructuring plans' severance accrual:
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Summary of Total Restructuring Charges Recorded in the Consolidated Statements of Operations and Comprehensive Loss | The following table presents restructuring charges recorded in the consolidated statements of operations and comprehensive loss for the periods presented:
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Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Related Party Transactions | The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive loss for the periods presented relating to services provided by Tregaron and its affiliates under these agreements:
The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive loss for the periods presented relating to services provided by IBS and its affiliates under these agreements:
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following tables contain financial information for each reportable segment for the three and nine months ended September 30, 2017 and 2018:
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Schedule of Error Corrections | The following table represents the impact of the revised deferred income tax provision on the impacted lines of the statement of cash flows for the periods shown (in thousands):
The following table represents the impact of the income statement revision to the first and second quarters of 2018 due to the revised deferred income tax provision (in thousands, except per share data):
The following table represents the impact of the revised deferred income tax provision on the impacted balance sheet accounts as of the dates shown (in thousands):
The following table reflects the differences between the amounts as reported and the amounts as revised for gross profit, net loss and adjusted EBITDA for the web presence and domain segments for the three and nine months ended September 30, 2017:
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Supplemental Guarantor Financial Information (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements | The following tables present supplemental condensed consolidating balance sheet information of the Company (“Parent”), the Issuer, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as of December 31, 2017 and September 30, 2018, supplemental condensed consolidating results of operations for the three and nine months ended September 30, 2017 and 2018, and cash flow information for the nine months ended September 30, 2017 and 2018: Condensed Consolidating Balance Sheets December 31, 2017 (in thousands)
Condensed Consolidating Balance Sheets September 30, 2018 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Three Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Nine Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Three Months Ended September 30, 2018 (in thousands)
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Nine Months Ended September 30, 2018 (in thousands)
Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2017 (in thousands)
Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2018 (in thousands)
|
Summary of Significant Accounting Policies - Summary of Estimated Useful Lives (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Property, Plant and Equipment [Line Items] | ||||
Goodwill impairment | $ 0 | $ 0 | ||
Impairment of long lived assets | $ 0 | $ 13,800,000 | $ 0 | $ 13,848,000 |
Building | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment useful life | 35 years | |||
Software | Minimum | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment useful life | 2 years | |||
Software | Maximum | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment useful life | 3 years | |||
Computers and office equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment useful life | 3 years | |||
Furniture and fixtures | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, plant and equipment useful life | 5 years |
Summary of Significant Accounting Policies - Summary of Calculation of Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Accounting Policies [Abstract] | |||||||
Net loss attributable to Endurance International Group Holdings, Inc. | $ (6,335) | $ (40,264) | $ (8,236) | $ (114,781) | |||
Net loss per share attributable to Endurance International Group Holdings, Inc.: | |||||||
Basic net income (loss) per share (in usd per share) | $ (0.04) | $ 0.00 | $ (0.02) | $ (0.29) | $ (0.01) | $ (0.06) | $ (0.84) |
Diluted net income (loss) per share (in usd per share) | $ (0.04) | $ 0.00 | $ (0.02) | $ (0.29) | $ (0.01) | $ (0.06) | $ (0.84) |
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc.: | |||||||
Weighted average number of basic shares outstanding (in shares) | 143,107,122 | 142,340,561 | 140,361,982 | 137,793,609 | 141,356,567 | 141,946,574 | 136,688,115 |
Weighted average number of diluted shares outstanding (in shares) | 143,107,122 | 144,702,002 | 140,361,982 | 137,793,609 | 141,356,567 | 141,946,574 | 136,688,115 |
Summary of Significant Accounting Policies - Summary Of Weighted Average Potentially Dilutive Shares Excluded From Calculation Of Diluted Loss Per Share (Detail) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total | 15,277,877 | 18,376,402 | 15,114,561 | 17,922,369 |
Restricted Stock Awards and Units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total | 6,915,158 | 7,782,806 | 6,470,097 | 6,974,708 |
Stock Option Awards | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total | 8,362,719 | 10,593,596 | 8,644,464 | 10,947,661 |
Correction of Income Tax Expense - Fiscal Year 2018 - Narrative (Details) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Domestic Tax Authority | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Operating loss carryforwards | $ 236.3 |
Domestic Tax Authority | Originally Filed | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Operating loss carryforwards | 157.6 |
State and Local Jurisdiction | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Operating loss carryforwards | 168.3 |
State and Local Jurisdiction | Originally Filed | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |
Operating loss carryforwards | $ 128.6 |
Correction of Income Tax Expense - Fiscal Year 2018 - Effects on Cash Flow Statement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Net loss | $ (6,335) | $ 627 | $ (2,528) | $ (40,264) | $ (1,901) | $ (8,236) | $ (107,257) |
Deferred tax expense (benefit) | (4,068) | (4,484) | 8,839 | 6,442 | |||
Net cash (used in) provided by operating activities | $ 51,341 | 52,360 | 82,252 | $ 133,593 | $ 128,866 | ||
Originally Filed | |||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Net loss | (1,969) | (7,088) | (9,057) | ||||
Deferred tax expense (benefit) | 492 | 2,672 | |||||
Net cash (used in) provided by operating activities | 52,360 | 82,252 | |||||
Adjustment | |||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Net loss | $ 2,596 | 4,560 | 7,156 | ||||
Deferred tax expense (benefit) | (4,560) | (7,156) | |||||
Net cash (used in) provided by operating activities | $ 0 | $ 0 |
Acquisitions - Summary of Deferred Consideration Related to Acquisition (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Business Acquisition [Line Items] | ||
Deferred consideration, short-term | $ 2,386 | $ 4,365 |
AppMachine | ||
Business Acquisition [Line Items] | ||
Deferred consideration | 3,700 | 7,900 |
Deferred consideration, short-term | $ 2,400 | $ 4,400 |
Property and Equipment and Capital Lease Obligations - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 11,889 | $ 13,571 | $ 36,753 | $ 40,733 |
Capital lease included in software | 15,500 | 15,500 | ||
Capital leases | $ 10,600 | $ 10,600 |
Fair Value Measurements - Basis of Fair Value Measurements (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Financial assets: | ||
Interest rate cap (included in other assets) | $ 6,863 | $ 452 |
Total financial assets | 6,863 | 452 |
Significant Other Observable Inputs (Level 2) | ||
Financial assets: | ||
Interest rate cap (included in other assets) | 6,863 | 452 |
Total financial assets | $ 6,863 | $ 452 |
Goodwill and Other Intangible Assets - Changes in Goodwill Balances (Detail) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 1,850,582 |
Foreign translation impact | (1,318) |
Goodwill, ending balance | 1,849,264 |
Web Presence | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 1,216,419 |
Foreign translation impact | (1,318) |
Goodwill, ending balance | 1,215,101 |
Email Marketing | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 604,305 |
Foreign translation impact | 0 |
Goodwill, ending balance | 604,305 |
Domain | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 29,858 |
Foreign translation impact | 0 |
Goodwill, ending balance | $ 29,858 |
Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Impairment of other intangible assets | $ 0 | $ 0 | ||
Amortization of other intangible assets | $ 26,177,000 | $ 35,347,000 | $ 77,890,000 | $ 104,554,000 |
Notes Payable - Schedule of Long Term Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-Term Debt [Line Items] | ||
Total | $ 1,824,042 | $ 1,892,245 |
Current maturities | 31,606 | 33,945 |
Excluding current maturities | 1,792,436 | 1,858,300 |
2018 First Lien Term Loan | ||
Long-Term Debt [Line Items] | ||
Total | 1,493,131 | 0 |
Current maturities | 31,606 | |
Excluding current maturities | 1,461,525 | |
2017 First Lien Term Loan | ||
Long-Term Debt [Line Items] | ||
Total | 0 | 1,563,197 |
Current maturities | 0 | 33,945 |
Excluding current maturities | 0 | 1,529,252 |
Notes | ||
Long-Term Debt [Line Items] | ||
Total | 330,911 | 329,048 |
Current maturities | 0 | 0 |
Excluding current maturities | 330,911 | 329,048 |
Revolving credit facilities | ||
Long-Term Debt [Line Items] | ||
Total | $ 0 | $ 0 |
Notes Payable - Schedule of 2018 First Lien Term Loan (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-Term Debt [Line Items] | ||
Long-term debt, gross | $ 1,880,002 | |
Deferred financing costs | (33,515) | $ (37,736) |
Total | 1,824,042 | 1,892,245 |
Current maturities | 31,606 | 33,945 |
Excluding current maturities | 1,792,436 | 1,858,300 |
2018 First Lien Term Loan | ||
Long-Term Debt [Line Items] | ||
Long-term debt, gross | 1,530,002 | |
Unamortized deferred financing costs | (19,594) | |
Deferred financing costs | (17,277) | |
Total | 1,493,131 | $ 0 |
Current maturities | 31,606 | |
Excluding current maturities | $ 1,461,525 |
Notes Payable-Schedule of 2017 First Lien Term Loan (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-Term Debt [Line Items] | ||
Long-term debt, gross | $ 1,880,002 | |
Deferred financing costs | (33,515) | $ (37,736) |
Total | 1,824,042 | 1,892,245 |
Current maturities | 31,606 | 33,945 |
Excluding current maturities | 1,792,436 | 1,858,300 |
2017 First Lien Term Loan | ||
Long-Term Debt [Line Items] | ||
Long-term debt, gross | 0 | 1,605,792 |
Unamortized deferred financing costs | 0 | (22,456) |
Deferred financing costs | 0 | (20,139) |
Total | 0 | 1,563,197 |
Current maturities | 0 | 33,945 |
Excluding current maturities | $ 0 | $ 1,529,252 |
Notes Payable - Schedule of Senior Notes (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-Term Debt [Line Items] | ||
Long-term debt, gross | $ 1,880,002 | |
Deferred financing costs | (33,515) | $ (37,736) |
Total | 1,824,042 | 1,892,245 |
Current maturities | 31,606 | 33,945 |
Long-term debt, excluding current maturities | 1,792,436 | 1,858,300 |
Notes | ||
Long-Term Debt [Line Items] | ||
Long-term debt, gross | 350,000 | 350,000 |
Unamortized deferred financing costs | (13,921) | (15,280) |
Deferred financing costs | (5,168) | (5,672) |
Total | 330,911 | 329,048 |
Current maturities | 0 | 0 |
Long-term debt, excluding current maturities | $ 330,911 | $ 329,048 |
Notes Payable - Summary of Future Debt Maturities (Detail) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
(Remainder of) 2018 | $ 7,902 |
2019 | 31,606 |
2020 | 31,606 |
2021 | 31,606 |
2022 | 31,606 |
Thereafter | 1,745,676 |
Total | $ 1,880,002 |
Stockholders' Equity - Additional Information (Detail) |
9 Months Ended |
---|---|
Sep. 30, 2018
vote
| |
Equity [Abstract] | |
Number of votes per share | 1 |
Revenue - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenue | $ 283,770,000 | $ 295,222,000 | $ 862,896,000 | $ 882,617,000 | |
Contract impairment loss | 0 | 0 | |||
Credit loss expense | 0 | 0 | |||
Accounting Standards Update 2014-09 | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Adjustment to beginning retained earnings resulting from adoption of ASC 606, net of tax impact of $7.0 million | $ 59,384,000 | ||||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenue | (573,000) | (1,221,000) | |||
Customer acquisition costs | $ 0 | $ 500,000 |
Redeemable Non-Controlling Interest - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jul. 07, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Jul. 14, 2016 |
May 16, 2016 |
Jan. 06, 2016 |
Aug. 31, 2014 |
|
Redeemable Noncontrolling Interest [Line Items] | ||||||||||
Reduced accretion value | $ 14,200 | |||||||||
Accretion in excess of fair value | $ 0 | $ 0 | $ 0 | $ 7,247 | ||||||
WZ (UK) Ltd. | ||||||||||
Redeemable Noncontrolling Interest [Line Items] | ||||||||||
Ownership interest | 86.40% | 77.50% | 57.50% | 49.00% | ||||||
Payments to acquire business | $ 25,000 |
Severance and Other Exit Costs - Summary of Aggregate Activity Related to Company's Facilities Exit Costs Accrual and Severance Accrual (Detail) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Employee Severance | |
Restructuring Reserve [Roll Forward] | |
Beginning Balance | $ 3,668 |
Severance charges | 2,978 |
Cash paid | (5,646) |
Ending Balance | 1,000 |
Facilities Closing | |
Restructuring Reserve [Roll Forward] | |
Beginning Balance | 6,005 |
Facility adjustments | 43 |
Sublease income received | 322 |
Cash paid | (2,080) |
Ending Balance | $ 4,290 |
Severance and Other Exit Costs - Summary of Total Restructuring Charges Recorded in the Consolidated Statements of Operations and Comprehensive Loss (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | $ 197 | $ 4,489 | $ 3,021 | $ 14,584 |
Cost of revenue | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | 37 | 449 | 1,443 | 3,892 |
Sales and marketing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | 17 | 1,011 | 133 | 3,260 |
Engineering and development | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | 33 | 271 | 389 | 1,349 |
General and administrative | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | $ 110 | $ 2,758 | $ 1,056 | $ 6,083 |
Commitments and Contingencies - Additional Information (Detail) |
3 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2017
USD ($)
|
Aug. 07, 2015
defendant
|
Sep. 30, 2018
USD ($)
|
Mar. 31, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
|
|
Loss Contingencies [Line Items] | |||||||
Minimum revenue requirement from single customer per year | $ 500 | ||||||
Legal settlement reserve | $ (935,000) | $ 7,325,000 | $ 0 | ||||
Machado vs Endurance and McGee vs Constant Contact | |||||||
Loss Contingencies [Line Items] | |||||||
Legal settlement reserve | $ 8,500,000 | ||||||
Loss contingency accrual | $ 7,300,000 | $ 7,300,000 | $ 8,300,000 | ||||
Constant Contact, Inc. | McGee vs Constant Contact | |||||||
Loss Contingencies [Line Items] | |||||||
Number of defendants | defendant | 2 |
Related Party Transactions - Summary of Related Party Transactions (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Related Party Transaction [Line Items] | ||||
Revenue | $ (283,770) | $ (295,222) | $ (862,896) | $ (882,617) |
Sales and marketing | 63,831 | 66,276 | 197,733 | 211,154 |
Engineering and development | 22,683 | 19,882 | 64,559 | 60,393 |
General and administrative | 25,693 | 51,269 | 95,212 | 130,929 |
Immediate Family Member of Management or Principal Owner | ||||
Related Party Transaction [Line Items] | ||||
Cost of revenue | 3,330 | 3,100 | 10,555 | 9,100 |
Sales and marketing | 160 | 500 | 605 | 1,000 |
Engineering and development | 290 | 200 | 960 | 850 |
General and administrative | 20 | 50 | 65 | 150 |
Total related party transaction expense, net | 3,800 | 3,850 | 12,185 | 11,100 |
Chief Executive Officer and a Director | ||||
Related Party Transaction [Line Items] | ||||
Revenue | (1,430) | (1,050) | (4,075) | (2,150) |
Revenue (contra) | 1,800 | 1,850 | 6,140 | 4,050 |
Total related party transaction impact to revenue | 370 | 800 | 2,065 | 1,900 |
Cost of revenue | 170 | 150 | 490 | 350 |
Total related party transaction expense, net | $ 540 | $ 950 | $ 2,555 | $ 2,250 |
Segment Information - Schedule of Segment Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Segment Reporting Information [Line Items] | |||||||
Revenue | $ 283,770 | $ 295,222 | $ 862,896 | $ 882,617 | |||
Gross profit | 154,825 | 136,357 | 469,299 | 428,420 | |||
Net loss | (6,335) | $ 627 | $ (2,528) | (40,264) | $ (1,901) | (8,236) | (107,257) |
Interest expense, net | 37,238 | 35,645 | 111,203 | 120,516 | |||
Income tax expense | 11,715 | $ (946) | $ (1,943) | 2,982 | $ (2,889) | 8,826 | 11,384 |
Depreciation | 11,889 | 13,571 | 36,753 | 40,733 | |||
Amortization of other intangible assets | 26,177 | 35,347 | 77,890 | 104,554 | |||
Stock-based compensation | 7,550 | 19,580 | 21,932 | 48,749 | |||
Restructuring expenses | 197 | 4,489 | 3,021 | 14,584 | |||
Transaction expenses and charges | 0 | 0 | 0 | 773 | |||
(Gain) loss of unconsolidated entities | (33) | 2 | (72) | ||||
Impairment of other long-lived assets | 14,448 | 14,448 | |||||
SEC investigations reserve | 8,000 | 8,000 | |||||
Shareholder litigation reserve | (935) | 7,325 | 0 | ||||
Adjusted EBITDA | 87,496 | 93,765 | 258,716 | 256,412 | |||
Intercompany revenue | 2,500 | 2,500 | 7,600 | 8,100 | |||
Web Presence | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenue | 149,871 | 159,530 | 457,603 | 483,661 | |||
Gross profit | 75,074 | 77,032 | 225,149 | 229,186 | |||
Net loss | (7,565) | (20,403) | (20,549) | (67,226) | |||
Interest expense, net | 18,132 | 14,686 | 53,503 | 50,877 | |||
Income tax expense | 6,136 | 798 | 960 | 12,645 | |||
Depreciation | 8,401 | 9,399 | 24,769 | 27,401 | |||
Amortization of other intangible assets | 11,941 | 14,884 | 35,812 | 44,431 | |||
Stock-based compensation | 1,569 | 15,510 | 12,066 | 38,023 | |||
Restructuring expenses | 54 | 3,468 | 1,654 | 8,944 | |||
Transaction expenses and charges | 0 | ||||||
(Gain) loss of unconsolidated entities | (33) | 2 | (72) | ||||
Impairment of other long-lived assets | 600 | 600 | |||||
SEC investigations reserve | 4,323 | 4,323 | |||||
Shareholder litigation reserve | (768) | 4,780 | 0 | ||||
Adjusted EBITDA | 37,900 | 43,232 | 112,997 | 119,946 | |||
Email Marketing | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenue | 102,111 | 101,526 | 306,712 | 298,401 | |||
Gross profit | 71,356 | 65,286 | 214,909 | 188,181 | |||
Net loss | 6,596 | 2,202 | 22,350 | (8,026) | |||
Interest expense, net | 17,128 | 20,514 | 50,866 | 68,212 | |||
Income tax expense | 4,179 | 1,323 | 8,009 | (4,821) | |||
Depreciation | 2,538 | 3,233 | 9,090 | 10,632 | |||
Amortization of other intangible assets | 13,384 | 18,770 | 39,716 | 55,697 | |||
Stock-based compensation | 4,472 | 1,668 | 7,168 | 5,392 | |||
Restructuring expenses | 141 | 682 | 723 | 4,743 | |||
Transaction expenses and charges | 773 | ||||||
(Gain) loss of unconsolidated entities | 0 | 0 | 0 | ||||
Impairment of other long-lived assets | 0 | 0 | |||||
SEC investigations reserve | 2,751 | 2,751 | |||||
Shareholder litigation reserve | 0 | 1,500 | 0 | ||||
Adjusted EBITDA | 48,438 | 51,143 | 139,422 | 135,353 | |||
Domain | |||||||
Segment Reporting Information [Line Items] | |||||||
Revenue | 31,788 | 34,166 | 98,581 | 100,555 | |||
Gross profit | 8,395 | (5,961) | 29,241 | 11,053 | |||
Net loss | (5,366) | (22,063) | (10,037) | (32,005) | |||
Interest expense, net | 1,978 | 445 | 6,834 | 1,427 | |||
Income tax expense | 1,400 | 861 | (143) | 3,560 | |||
Depreciation | 950 | 939 | 2,894 | 2,700 | |||
Amortization of other intangible assets | 852 | 1,693 | 2,362 | 4,426 | |||
Stock-based compensation | 1,509 | 2,402 | 2,698 | 5,334 | |||
Restructuring expenses | 2 | 339 | 644 | 897 | |||
Transaction expenses and charges | 0 | ||||||
(Gain) loss of unconsolidated entities | 0 | 0 | 0 | ||||
Impairment of other long-lived assets | 13,848 | 13,848 | |||||
SEC investigations reserve | 926 | 926 | |||||
Shareholder litigation reserve | (167) | 1,045 | 0 | ||||
Adjusted EBITDA | $ 1,158 | $ (610) | $ 6,297 | $ 1,113 |
Segment Information - Schedule of Error Correction (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Segment Reporting Information [Line Items] | |||||||
Gross profit | $ 154,825 | $ 136,357 | $ 469,299 | $ 428,420 | |||
Net loss | (6,335) | $ 627 | $ (2,528) | (40,264) | $ (1,901) | (8,236) | (107,257) |
Adjusted EBITDA | 87,496 | 93,765 | 258,716 | 256,412 | |||
Web Presence | |||||||
Segment Reporting Information [Line Items] | |||||||
Gross profit | 75,074 | 77,032 | 225,149 | 229,186 | |||
Net loss | (7,565) | (20,403) | (20,549) | (67,226) | |||
Adjusted EBITDA | 37,900 | 43,232 | 112,997 | 119,946 | |||
Domain | |||||||
Segment Reporting Information [Line Items] | |||||||
Gross profit | 8,395 | (5,961) | 29,241 | 11,053 | |||
Net loss | (5,366) | (22,063) | (10,037) | (32,005) | |||
Adjusted EBITDA | $ 1,158 | (610) | $ 6,297 | 1,113 | |||
(as reported) | |||||||
Segment Reporting Information [Line Items] | |||||||
Net loss | $ (1,969) | $ (7,088) | $ (9,057) | ||||
(as reported) | Web Presence | |||||||
Segment Reporting Information [Line Items] | |||||||
Gross profit | 75,097 | 224,300 | |||||
Net loss | (22,416) | (73,346) | |||||
Adjusted EBITDA | 41,297 | 115,060 | |||||
(as reported) | Domain | |||||||
Segment Reporting Information [Line Items] | |||||||
Gross profit | (4,026) | 15,939 | |||||
Net loss | (20,050) | (25,885) | |||||
Adjusted EBITDA | $ 1,325 | $ 5,999 |
Supplemental Guarantor Financial Information - Additional Information (Details) |
3 Months Ended | |
---|---|---|
Dec. 31, 2016
USD ($)
guarantor
|
Feb. 29, 2016
USD ($)
|
|
Guarantor Obligations [Line Items] | ||
Number of guarantors sold | guarantor | 2 | |
Notes | ||
Guarantor Obligations [Line Items] | ||
Senior notes | $ 350,000,000.0 | |
Interest rate, stated percentage | 10.875% | |
CardStar | Guarantor Subsidiaries | ||
Guarantor Obligations [Line Items] | ||
Proceeds from sale of assets | $ 100,000 |