OREANDA-NEWS. Endurance International Group Holdings, Inc. (NASDAQ:EIGI), a leading provider of cloud-based platform solutions designed to help small and medium-sized businesses succeed online, today reported financial results for its second quarter ended June 30, 2016.

“We continue to focus on a long-term vision, and our second quarter was another step in that direction, with healthy year over year growth and operational execution,” commented Hari Ravichandran, chief executive officer and founder of Endurance International Group. “As we exit the first half of the year and assess our 2016 progress, we continue to learn from our marketing efforts. Certain initiatives, such as Constant Contact, performed above expectations, while others, such as our growth products, came in below expectations and at a higher than expected marketing cost. We believe that these investments will fuel future growth in revenue and cash flows, but in-year returns for these initiatives are lower than earlier anticipated. We have revised our outlook downward accordingly. We remain confident in our ability to continue working toward a longer-term vision of providing a fully integrated suite of solutions for small businesses.”

Changes to non-GAAP financial measures
During the second quarter, the company made several changes to its non-GAAP financial measures in light of recent Compliance and Disclosure Interpretations (C&DIs) issued by the staff of the U.S. Securities and Exchange Commission (SEC), and in an effort to simplify some of its non-GAAP measures. The company has changed the definition of its adjusted EBITDA measure to GAAP net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, (gain) loss of unconsolidated entities, and impairment of other long-lived assets. This revised measure does not adjust for changes in deferred revenue, and includes the impact of the following items which were previously excluded: (gain) loss on sale of assets, integration expenses, legal advisory expenses, and purchase accounting impact of reduced fair value of deferred domain registration costs. 

Further, after the second quarter, the company will no longer present adjusted revenue, and has therefore changed its average revenue per subscriber (ARPS) definition such that it is now based on GAAP revenue rather than adjusted revenue. Please see the Appendix to this earnings release for a presentation of the company’s revised definitions of adjusted EBITDA and ARPS for prior periods, as well as a reconciliation of the revised definitions to previous definitions of adjusted EBITDA and ARPS.

Second Quarter 2016 Financial Highlights

  • GAAP revenue for the second quarter of 2016 was $290.7 million, an increase of 59 percent compared to $182.4 million in the second quarter of 2015.  Revenue for the quarter includes a contribution of $94.7 million from Constant Contact. 
  • Adjusted revenue for the second quarter was $292.6 million, an increase of 60 percent compared to $183.3 million in the second quarter of 2015.  Adjusted revenue for the quarter includes a contribution of $95.2 million from Constant Contact.  
  • Net loss for the second quarter was $(33.4) million compared to net loss of $(2.1) million for the second quarter of 2015.  
  • Net loss attributable to Endurance International Group Holdings, Inc. for the second quarter was $(28.0) million, or $(0.21) per diluted share, compared to net loss of $(2.1) million, or $(0.02) per diluted share, for the second quarter of 2015.
  • Under the revised definition of adjusted EBITDA discussed above, adjusted EBITDA for the second quarter was $76.9 million compared to $51.1 million in the second quarter of 2015.  
  • Under the previous definition of adjusted EBITDA, previous adjusted EBITDA for the second quarter was $93.8 million compared to $61.6 million in the second quarter of 2015.
  • GAAP cash flow from operations for the second quarter was $53.8 million, an increase of 17 percent compared to $46.0 million for the second quarter of 2015. 
  • Free cash flow, defined as GAAP cash flow from operations less capital expenditures and capital lease obligations, for the second quarter was $41.6 million, an increase of 10 percent compared to $37.8 million for the second quarter of 2015. 

Second Quarter Operating Highlights

  • Total subscribers on platform were approximately 5.480 million. See “Total Subscribers” below.  
  • Under the revised definition of ARPS discussed above, ARPS for the second quarter was $17.74, compared to $14.23 for the same period a year ago. Excluding the impact of Constant Contact, ARPS for the second quarter was $13.32.
  • Under the previous definition of ARPS, ARPS for the second quarter was $17.85, compared to $14.30 for the same period a year ago. Excluding the impact of Constant Contact, ARPS for the second quarter under the previous definition was $13.41. 
  • In July, the company increased its ownership in the WZ UK, Ltd. joint venture for $18.0 million, bringing its ownership stake to 86.4 percent.
  • Also in July, the company acquired the remaining 60 percent of Appmachine B.V., a Netherlands-based developer of mobile app solutions in which it previously had a 40 percent stake, for $22.5 million payable over a four year period, of which $5.5 million was paid upon closing. 

Fiscal 2016 Guidance:
The company is providing the following guidance as of the date of this release, August 2, 2016. For the full year ending December 31, 2016, the company expects:

On a closing date basis* Prior guidance – closing date basis     Updated guidance
(at Aug. 2, 2016)
Adjusted revenue ~$1,175 million      
Change in outlook ~$(60) million      
Purchase accounting impact ~$(25) million      
GAAP revenue -     ~$1,090 million
         
GAAP net loss(1)     ~$(70) million  
Previous adjusted EBITDA ~$400 million      
Change in outlook ~$(30) million      
Change in deferred revenue ~$(80) million      
Integration and legal costs ~$(20) million      
Adjusted EBITDA -     ~$270 million
         
Cash flow from operations(1) -   ~$158 million  
Capital expenditures (including capitalized leases) ~$60 million     ~$58 million
Free cash flow $140-$150 million     $100 million
         
On a combined entity pro forma** basis: Prior guidance –pro forma basis     Updated guidance
(at Aug. 2, 2016)
Adjusted revenue ~$1,225 million      
Change in outlook ~$(60) million      
Timing of the close of the Constant Contact transaction $(10) million      
Purchase accounting impact ~$(25) million      
GAAP revenue       ~$1,130 million
         
Net loss(1)     ~$(58) million  
Previous adjusted EBITDA ~$405 million      
Change in outlook ~$(30) million      
Change in deferred revenue ~$(80) million      
Integration and legal costs ~$(20) million      
Adjusted EBITDA       ~$275 million
         

(1) Please see reconciliation of estimated GAAP net (loss) income to guidance for adjusted EBITDA, and GAAP cash flow from operations to guidance for free cash flow in the attached reconciliation tables for the period noted.
*Reflects inclusion of Constant Contact results starting on February 10, 2016, the day after the closing of the acquisition.
**Represents guidance for 2016 as if the acquisition of Constant Contact had occurred on January 1, 2016.

Adjusted revenue, adjusted EBITDA, previous adjusted EBITDA, free cash flow, and ARPS (previous definition) are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most comparable measure calculated in accordance with GAAP is provided in the financial statement tables included at the end of this press release. We will not be reporting or providing guidance for adjusted revenue or previous adjusted EBITDA in future periods.

About Endurance International Group
Endurance International Group (NASDAQ:EIGI) (em)Powers millions of small businesses worldwide with products and technology to vitalize their online web presence, email marketing, mobile business solutions, and more. The Endurance family of brands includes: Constant Contact, Bluehost, HostGator, Domain.com, BigRock, SiteBuilder and Impress.ly, among others. Headquartered in Burlington, Massachusetts, Endurance employs more than 3,800 people across the United States, Brazil, India and the United Kingdom.

Endurance International Group and the compass logo are trademarks of The Endurance International Group, Inc. Constant Contact, the Constant Contact logo and other brand names of Endurance International Group are trademarks of The Endurance International Group, Inc. or its subsidiaries. 

 Endurance International Group Holdings, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share amounts)
 
    December 31, 2015     June 30, 2016  
Assets                
Current assets:                
Cash and cash equivalents   $ 33,030     $ 75,592  
Restricted cash     1,048       3,513  
Accounts receivable     12,040       11,564  
Prepaid domain name registry fees     55,793       55,020  
Prepaid expenses and other current assets     15,675       37,742  
Total current assets     117,586       183,431  
Property and equipment—net     75,762       105,241  
Goodwill     1,207,255       1,836,912  
Other intangible assets—net     359,786       690,707  
Deferred financing costs     —       5,748  
Investments     27,905       34,513  
Prepaid domain name registry fees, net of current portion     9,884       10,042  
Other assets     4,322       4,752  
Total assets   $ 1,802,500     $ 2,871,346  
Liabilities, redeemable non-controlling interest and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 12,280     $ 15,345  
Accrued expenses     50,869       97,051  
Deferred revenue     285,945       355,318  
Current portion of notes payable     77,500       35,700  
Current portion of capital lease obligations     5,866       6,539  
Deferred consideration—short term     51,488       50,575  
Other current liabilities     3,973       3,685  
Total current liabilities     487,921       564,213  
Long-term deferred revenue     79,682       89,589  
Notes payable—long term, net of original issue discounts of $0 and $27,550, and deferred
  financing costs of $990 and $44,687, respectively		     1,014,885       1,969,588  
Capital lease obligations—long term     7,215       3,673  
Deferred tax liability     28,786       40,502  
Deferred consideration—long term     813       25  
Other liabilities     3,524       7,436  
Total liabilities     1,622,826       2,675,026  
Redeemable non-controlling interest     —       28,208  
Commitments and contingencies                
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; 132,024,558 and
  133,574,477 shares issued at December 31, 2015 and June 30, 2016, respectively;
  131,938,485 and 133,574,477 outstanding at December 31, 2015 and June 30, 2016,
  respectively		     14       14  
Additional paid-in capital     848,740       844,464  
Accumulated other comprehensive loss     (1,718 )     (2,774 )
Accumulated deficit     (667,362 )     (673,592 )
Total stockholders’ equity     179,674       168,112  
Total liabilities, redeemable non-controlling interest and stockholders’ equity   $ 1,802,500     $ 2,871,346  
                 
Endurance International Group Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except share and per share amounts)
 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2015     2016     2015     2016  
Revenue   $ 182,431     $ 290,713     $ 359,749     $ 527,826  
Cost of revenue     104,937       153,077       205,911       289,553  
Gross profit     77,494       137,636       153,838       238,273  
Operating expense:                                
Sales and marketing     37,224       80,309       72,268       159,603  
Engineering and development     6,633       27,687       12,004       43,942  
General and administrative     19,471       34,830       36,678       75,109  
Transactions expenses     1,618       978       3,141       32,098  
Total operating expense     64,946       143,804       124,091       310,752  
Income (loss) from operations     12,548       (6,168 )     29,747       (72,479 )
Other income (expense):                                
Other income     5,440       —       5,440       11,410  
Interest income     117       142       209       276  
Interest expense     (14,011 )     (40,994 )     (28,332 )     (71,365 )
Total other income (expense)—net     (8,454 )     (40,852 )     (22,683 )     (59,679 )
Income (loss) before income taxes and equity earnings of
  unconsolidated entities		     4,094       (47,020 )     7,064       (132,158 )
Income tax expense (benefit)     2,707       (13,931 )     3,685       (113,833 )
Income (loss) before equity earnings of unconsolidated entities     1,387       (33,089 )     3,379       (18,325 )
Equity loss of unconsolidated entities, net of tax     3,458       341       4,566       1,024  
Net loss   $ (2,071 )   $ (33,430 )   $ (1,187 )   $ (19,349 )
Net loss attributable to non-controlling interest     —       (5,390 )     —       (13,120 )
Net loss attributable to Endurance International
  Group Holdings, Inc.		   $ (2,071 )   $ (28,040 )   $ (1,187 )   $ (6,229 )
Comprehensive income (loss):                                
Foreign currency translation adjustments     94       540       (522 )     882  
Unrealized loss on cash flow hedge, net of taxes of $0 and
($218), and $0 and ($824) for the three and six months
ended June 30, 2015 and 2016, respectively		     —       (427 )     —       (1,938 )
Total comprehensive loss   $ (1,977 )   $ (27,927 )   $ (1,709 )   $ (7,285 )
Basic and Diluted net loss per share attributable to Endurance International Group Holdings, Inc.   $ (0.02 )   $ (0.21 )   $ (0.01 )   $ (0.05 )
Weighted-average common shares used in computing net loss per share attributable to Endurance International Group Holdings, Inc:                                
Basic and Diluted     131,186,382       132,566,622       131,091,756       132,736,382  
                                 
Endurance International Group Holdings, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 
    Three Months Ended June 30,   Six Months Ended June 30,
      2015       2016       2015       2016  
Cash flows from operating activities:                
Net loss   $ (2,071 )   $   (33,430 )   $   (1,187 )   $   (19,349 )
Adjustments to reconcile net loss to net cash provided by operating activities:                 
Depreciation of property and equipment       8,229        16,760       16,095       29,932  
Amortization of other intangible assets from acquisitions       22,135        37,823       43,433       67,697  
Impairment of long-lived assets     —        6,848       —       8,285  
Amortization of deferred financing costs       21        1,651       41       2,562  
Amortization of net present value of deferred consideration       143        799       281       1,582  
Dividend from minority interest     —        50       —       50  
Amortization of original issue discounts     —        823       —       1,272  
Stock-based compensation       6,539       15,024       10,510       33,412  
Deferred tax expense (benefit)       1,580        (14,259 )     1,961       (117,462 )
(Gain) loss on sale of assets       (4 )     (224 )     36       (225 )
Gain from unconsolidated entities       (5,440 )     —       (5,440 )     (11,410 )
Loss of unconsolidated entities       3,458       341       4,566       1,024  
Loss from change in deferred consideration       887       —       1,083       21  
Changes in operating assets and liabilities, net of acquisitions:                
Accounts receivable       (1,592 )      (598 )     193       1,546  
Prepaid expenses and other current assets       (2,061 )      787       (6,802 )     (14,886 )
Accounts payable and accrued expenses       6,554        9,544       8,898       26,517  
Deferred revenue       7,631        11,904       22,564       55,047  
Net cash provided by operating activities       46,009        53,843       96,232       65,615  
Cash flows from investing activities:                
Businesses acquired in purchase transactions, net of cash acquired       (28,914 )      (18,180 )     (28,914 )     (899,889 )
Cash paid for minority investment     —        (5,000 )     —       (5,600 )
Purchases of property and equipment       (7,262 )      (10,821 )     (14,511 )     (20,961 )
Proceeds from note receivable       3,454       —       3,454       —  
Proceeds from sale of assets       38        252       64       252  
Purchases of intangible assets       (8 )      (27 )     (8 )     (27 )
Deposits of principal balances in restricted cash accounts       36        (31 )     (302 )     (768 )
Net cash used in investing activities       (32,656 )      (33,807 )     (40,217 )     (926,993 )
Cash flows from financing activities:                
Proceeds from issuance of term loan and notes, net of original issue discounts     —       —       —       1,056,178  
Repayments of term loans       (2,625 )      (24,925 )     (5,250 )     (33,850 )
Proceeds from borrowing of revolver       31,000       —       38,000       16,000  
Repayment of revolver       (17,000 )     —       (53,000 )     (83,000 )
Payment of financing costs     —        (122 )     —       (51,727 )
Payment of deferred consideration       (10,103 )     —       (10,591 )     (707 )
Payment of redeemable non-controlling interest liability       (10,181 )     —       (20,362 )     —  
Principal payments on capital lease obligations       (943 )      (1,457 )     (1,873 )     (2,896 )
Capital investment from minority partner     —        1,000       —       1,000  
Proceeds from exercise of stock options       299        735       652       1,328  
Net cash provided by (used in) financing activities       (9,553 )      (24,769 )     (52,424 )     902,326  
Net effect of exchange rate on cash and cash equivalents     69         1,048       (437 )     1,614  
Net (decrease) increase in cash and cash equivalents     3,869        (3,685 )     3,154       42,562  
Cash and cash equivalents:                
Beginning of period   $   31,664     $    79,277     $  32,379     $   33,030  
End of period   $   35,533     $  75,592     $    35,533     $   75,592  
Supplemental cash flow information:                
Interest paid   $   13,885     $  27,512     $   28,111     $   44,171  
Income taxes paid   $   1,715     $    1,480     $    2,417     $   2,448  
                                 


Following the second quarter of 2016, the company will no longer present adjusted EBITDA as previously defined.  The company has changed the definition of its adjusted EBITDA measure to GAAP net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, (gain) loss of unconsolidated entities, and impairment of other long-lived assets. Please see the Appendix for a presentation of the company’s revised definition of adjusted EBITDA as well as a reconciliation of the revised definition to the previous definition.

The following table presents a reconciliation of net loss calculated in accordance with GAAP to adjusted EBITDA and the previous definition of adjusted EBITDA (all data in thousands):

  Three Months Ended June 30,   Six Months Ended June 30,
    2015       2016       2015       2016  
Net loss attributable to Endurance International Group Holdings, Inc.  $ (2,071 )   $ (28,040 )   $ (1,187 )   $ (6,229 )
Net loss attributable to non-controlling interest   —       (5,390 )     —       (13,120 )
                               
Net loss $ (2,071 )   $ (33,430 )   $ (1,187 )   $ (19,349 )
               
Interest expense, net (including impact of amortization of deferred financing costs and original issuance discounts)   13,894       40,852       28,123       71,089  
Income tax expense (benefit)   2,707       (13,931 )     3,685       (113,833 )
Depreciation   8,229       16,760       16,095       29,932  
Amortization of other intangible assets   22,135       37,823       43,433       67,697  
Stock-based compensation   6,539       15,024       10,510       33,412  
Restructuring expenses   —       5,663       —       17,265  
Transaction expenses and charges   1,618       978       3,141       32,098  
(Gain) loss of unconsolidated entities (1)   (1,982 )     341       (874 )     (10,386 )
Impairment of other long-lived assets   —       6,848       —       8,285  
                               
Adjusted EBITDA $ 51,069     $ 76,928     $ 102,926     $ 116,210  
                               
(Gain) loss on sale of assets     (4 )     (224 )     36       (225 )
Integration expenses   2,325       3,965       3,743       7,400  
Legal advisory expenses (2)   1,055       1,460       1,055       3,000  
Changes in deferred revenue   7,631       11,904       22,564       55,047  
Impact of reduced fair value of deferred domain registration costs   (525 )     (258 )     (1,203 )     (549 )
                               
Previous Adjusted EBITDA $ 61,551     $ 93,775     $ 129,121     $ 180,883  
                               

(1) The gain of unconsolidated entities is reported on a net basis for the six months ended June 30, 2016. The six months ended June 30, 2016 includes an $11.4 million gain on our investment in WZ UK Ltd. This gain was generated on January 6, 2016, when we increased our ownership stake in WZ UK Ltd. from 49% to 57.5%, which required a revaluation of our existing investment to its implied fair value. This $11.4 million gain was partially offset by our proportionate share of net losses from unconsolidated entities of $1.0 million.
(2) Consists of legal and related advisory expenses associated with securities class action litigation and related matters and the SEC subpoenas received by us and Constant Contact in December 2015.

The following table reflects the reconciliation of cash flow from operations calculated in accordance with GAAP to free cash flow (“FCF”) (all data in thousands):

  Three Months Ended June 30,   Six Months Ended June 30,
    2015       2016       2015       2016  
GAAP cash flow from operations $   46,009     $   53,843     $   96,232     $   65,615  
Less:              
Capital expenditures and capital lease obligations (1)    (8,205 )     (12,278 )     (16,384 )     (23,857 )
                               
Free cash flow $   37,804     $   41,565     $   79,848     $   41,758  
                               

(1) Capital expenditures during the three and six months ended June 30, 2015 includes $0.9 million and $1.9 million principal payments under a three year capital lease for software.  Capital expenditures during the three and six months ended June 30, 2016 includes $1.5 million and $2.9 million of principal payments under a two year capital lease for software. The remaining balance on the capital lease is $10.2 million as of June 30, 2016.

Following the second quarter, the company will no longer present adjusted revenue, and has therefore changed its average revenue per subscriber (ARPS) definition such that it is now based on GAAP revenue rather than adjusted revenue.  Please see the Appendix to this earnings release for a presentation of the company’s revised definition of ARPS for prior periods, as well as a reconciliation of the revised definition to the previous definition.

The following table reflects the calculation of the revised definition of ARPS and the reconciliation of revenue calculated in accordance with GAAP to adjusted revenue and the previous definition of ARPS (all data in thousands, except ARPS data):  

  Three Months Ended June 30,   Six Months Ended June 30,
    2015       2016       2015       2016  
GAAP revenue $   182,431     $   290,713     $   359,749     $   527,826  
               
Total subscribers   4,394       5,480       4,394       5,480  
Average subscribers for the period   4,272       5,463       4,205       5,274  
Average revenue per subscriber (ARPS)
(revised definition, GAAP basis) 		$   14.23     $   17.74     $   14.26     $   16.68  
                               
GAAP revenue attributable to Constant Contact   —      $   94,672       —     $   133,737  
GAAP revenue excluding Constant Contact $   182,431     $   196,041     $   359,749     $   394,089  
               
Total subscribers excluding Constant Contact   4,394       4,929       4,394       4,929  
Average subscribers excluding Constant Contact   4,272       4,906       4,205       4,838  
ARPS excluding Constant Contact
(revised definition, GAAP basis)		 $   14.23     $   13.32     $   14.35     $   13.58  
                               
GAAP revenue $   182,431     $   290,713     $   359,749     $   527,826  
Purchase accounting adjustment     856       1,869         2,251       17,712  
Adjusted revenue $   183,287     $   292,582     $   362,000     $   545,538  
Average revenue per subscriber (ARPS)
(previous definition, adjusted revenue basis)		 $   14.30     $   17.85     $   14.35     $   17.24  
                               
Adjusted revenue excluding Constant Contact $   183,287     $   197,404     $ 362,000     $   397,637  
ARPS excluding Constant Contact (previous definition, adjusted revenue basis)  $   14.30     $   13.41     $   14.35     $   13.70  
 


Reconciliation of Updated Fiscal Year 2016 Guidance (as of August 2, 2016)

The following tables reflect the reconciliation of fiscal year 2016 estimated net loss calculated in accordance with GAAP to updated fiscal year 2016 guidance for adjusted EBITDA (previous and revised definitions). All figures shown are approximate.

Closing date basis* ($ in millions): Twelve Months Ending
December 31, 2016
Estimated net loss $   (70 )  
Estimated interest expense (net)    153    
Estimated income tax expense (benefit)    (140 )  
Estimated depreciation   63    
Estimated amortization of acquired intangible assets   142    
Estimated stock-based compensation    68    
Estimated restructuring expenses   21    
Estimated transaction expenses and charges   35    
Estimated (gain) loss of unconsolidated entities   (10 )  
Estimated impairment of other long-lived assets   8    
Adjusted EBITDA guidance– closing date basis $   270  
     
Estimated (gain) loss on sale of assets   --    
Estimated integration expenses    15    
Estimated legal advisory expenses    6    
Estimated change in deferred revenue    80    
Estimated impact of reduced fair value of deferred domain registration costs    (1 )  
Previous adjusted EBITDA(1) guidance, calculated under previous definition  -  closing date basis $ 370  
       

(1) The updated guidance (at August 2, 2016) under the previous definition is $30 million less than the Company’s prior guidance (at May 3, 2016) under the previous definition.   

Pro forma basis** ($ in millions): Twelve Months Ending
December 31, 2016
Estimated net loss $    (58 )  
Estimated interest expense (net)    164    
Estimated income tax expense (benefit)    (138 )  
Estimated depreciation    65    
Estimated amortization of acquired intangible assets    150    
Estimated stock-based compensation    70    
Estimated restructuring expenses    21    
Estimated transaction expenses and charges    3    
Estimated (gain) loss of unconsolidated entities    (10 )  
Estimated impairment of other long-lived assets    8    
Adjusted EBITDA guidance – pro forma basis $   275  
     
Estimated (gain) loss on sale of assets   --    
Estimated integration expenses    15    
Estimated legal advisory expenses    6    
Estimated change in deferred revenue   80    
Estimated impact of reduced fair value of deferred domain registration costs    (1 )  
Previous adjusted EBITDA(1)guidance, calculated under previous definition – pro forma basis $ 375  
       

(1) The updated guidance (at August 2, 2016) under the previous definition is $30 million less than the Company’s prior guidance (at May 3, 2016) under the previous definition.

The following table reflects the reconciliation of fiscal year 2016 estimated cash flow from operations calculated in accordance with GAAP to updated fiscal year 2016 guidance for free cash flow. All figures shown are approximate.

Closing date basis* ($ in millions): Twelve Months Ending
December 31, 2016
Estimated cash flow from operations $   158    
Estimated capital expenditures and capital lease obligations     (58 )  
Free cash flow guidance – closing date basis $   100  
       

The following tables reflect the reconciliation of updated fiscal year 2016 guidance for revenue to updated fiscal year 2016 guidance for adjusted revenue.  All figures shown are approximate.

Closing date basis* ($ in millions): Twelve Months Ending
December 31, 2016
Revenue guidance $   1,090    
Purchase accounting adjustments     25    
Adjusted revenue guidance(1)  – closing date basis  $   1,115  
       

(1) The updated guidance (at August 2, 2016) under the previous definition is $60 million less than the Company’s prior guidance (at May 3, 2016) under the previous definition.

Pro forma basis** ($ in millions): Twelve Months Ending
December 31, 2016
Revenue guidance $   1,130    
Purchase accounting adjustments     25    
Adjusted revenue guidance(1)  – pro forma basis  $   1,155  
       

(1) The updated guidance (at August 2, 2016) under the previous definition is $70 million less than the Company’s prior guidance (at May 3, 2016) under the previous definition.

*Reflects inclusion of Constant Contact results starting on February 10, 2016, the day after the closing of the acquisition.
**Represents guidance for 2016 as if the acquisition of Constant Contact had occurred on January 1, 2016.

Endurance International Group Holdings, Inc. – Appendix to Q2 Fiscal 2016 Earnings Release

Following the second quarter of 2016, the company will no longer present adjusted EBITDA as previously defined.  Going forward, the company has changed the definition of its adjusted EBITDA measure to GAAP net (loss) income, excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, (gain) loss of unconsolidated entities, and impairment of other long-lived assets.

The following table presents the company’s revised definition of adjusted EBITDA for prior periods, as well as a reconciliation of adjusted EBITDA as revised to the company’s previous definition of adjusted EBITDA (all data in thousands):

                                    Six months ended June 30,
  FY2013   Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY2014   Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY2015   Q1 2016 Q2 2016     2015     2016  
Net (loss) income $ (159,846 )   $ (22,469 ) $ (16,132 ) $ (9,443 ) $ (2,808 ) $ (50,852 )   $ 884   $ (2,071 ) $ (15,351 ) $ (9,232 ) $ (25,770 )   $ 14,081   $ (33,430 )   $ (1,187 ) $ (19,349 )
Interest, net (1) $ 92,027     $ 13,552   $ 14,088   $ 14,324   $ 15,119   $ 57,083     $ 14,229   $ 13,894   $ 14,517   $ 15,774   $ 58,414     $ 30,237   $ 40,852     $ 28,123   $ 71,089  
Income taxes $ (3,596 )   $ 3,439   $ 1,048   $ 289   $ 1,410   $ 6,186     $ 978   $ 2,707   $ 5,397   $ 2,260   $ 11,342     $ (99,902 ) $ (13,931 )   $ 3,685   $ (113,833 )
Depreciation $ 18,615     $ 7,046   $ 7,502   $ 8,005   $ 8,403   $ 30,956     $ 7,866   $ 8,229   $ 8,554   $ 9,361   $ 34,010     $ 13,172   $ 16,760     $ 16,095   $ 29,932  
Amortization $ 105,915     $ 24,079   $ 25,462   $ 26,247   $ 26,935   $ 102,723     $ 21,298   $ 22,135   $ 23,758   $ 23,866   $ 91,057     $ 29,874   $ 37,823     $ 43,433   $ 67,697  
Stock-based compensation $ 10,763     $ 3,544   $ 3,629   $ 4,189   $ 4,681   $ 16,043     $ 3,971   $ 6,539   $ 9,762   $ 9,653   $ 29,925     $ 18,388   $ 15,024     $ 10,510   $ 33,412  
Restructuring expenses   -       -   $ 1,247   $ 2,166   $ 1,047   $ 4,460       -     -   $ 1,194   $ 295   $ 1,489     $ 11,602   $ 5,663       -   $ 17,265  
Transaction expenses and charges $ 45,036     $ 1,363   $ 757   $ 1,786   $ 881   $ 4,787     $ 1,523   $ 1,618   $ 1,461   $ 4,980   $ 9,582     $ 31,120   $ 978     $ 3,141   $ 32,098  
(Gain) loss of unconsolidated entities $ 2,067     $ (21 ) $ (89 ) $ 84   $ 87   $ 61     $ 1,108   $ (1,982 ) $ 4,550   $ 5,524   $ 9,200     $ (10,727 ) $ 341     $ (874 ) $ (10,386 )
Impairment of other long-lived assets   -       -      -      -      -      -         -     -      -      -      -     $ 1,437   $ 6,848       -   $ 8,285  
Adjusted EBITDA $ 110,981     $ 30,533   $ 37,512   $ 47,647   $ 55,755   $ 171,447     $ 51,857   $ 51,069   $ 53,842   $ 62,481   $ 219,249     $ 39,282   $ 76,928     $ 102,926   $ 116,210  
                                       
(Gain) loss on sale of assets, and other $ 309     $ 6   $ 68   $ (365 ) $ 123   $ (168 )   $ 40   $ (4 ) $ (191 )     -    $ (155 )   $ (1 ) $ (224 )   $ 36   $ (225 )
Legal advisory expenses   -         -        -        -        -      -         -    $ 1,055   $ 133   $ 161   $ 1,349     $ 1,540   $ 1,460     $ 1,055   $ 3,000  
Integration expenses $ 45,594     $ 3,196   $ 6,728   $ 3,000   $ 2,543   $ 15,467     $ 1,418   $ 2,325   $ 6,576   $ 4,454   $ 14,773     $ 3,435   $ 3,965     $ 3,743   $ 7,400  
Changes in deferred revenue $ 51,047     $ 31,394   $ 18,523   $ 12,015   $ 5,722   $ 67,654     $ 14,933   $ 7,631   $ 6,640   $ 5,037   $ 34,241     $ 43,143   $ 11,904     $ 22,564   $ 55,047  
Impact of reduced fair value of domain registry costs   -     $ (6,002 ) $ (6,335 ) $ (4,255 ) $ (2,190 ) $ (18,782 )   $ (678 ) $ (525 ) $ (442 ) $ (360 ) $ (2,005 )   $ (291 ) $ (258 )   $ (1,203 ) $ (549 )
Previous adjusted EBITDA $ 207,931     $ 59,127   $ 56,496   $ 58,042   $ 61,953   $ 235,618     $ 67,570   $ 61,551   $ 66,558   $ 71,773   $ 267,452     $ 87,108   $ 93,775     $ 129,121   $ 180,883  
                                                                                                   


(1) Interest, net includes the impact of amortization of deferred financing costs and original issuance discounts.

Following the second quarter of 2016, the company will no longer present adjusted revenue, and has therefore changed its average revenue per subscriber (ARPS) definition such that it is now based on GAAP revenue rather than adjusted revenue.

The following table presents the company’s revised definition of ARPS for prior periods, as well as a reconciliation of the revised definition to its previous definition of ARPS (all data in thousands, except ARPS data):

                                    Six months ended June 30,
  FY2013   Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY2014   Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY2015   Q1 2016 Q2 2016     2015     2016  
GAAP revenue $ 520,296     $ 145,750   $ 151,992   $ 160,167   $ 171,936   $ 629,845     $ 177,318   $ 182,431   $ 188,523   $ 193,043   $ 741,315     $ 237,113   $ 290,713     $ 359,749   $ 527,826  
Total subscribers   3,502       3,654     3,747     3,841     4,087     4,087       4,206     4,394     4,482     4,669     4,669       5,446     5,480       4,394     5,480  
Average subscribers for the period   3,363       3,591     3,701     3,794     3,951     3,753       4,147     4,272     4,438     4,587     4,358       5,128     5,463       4,205     5,274  
                                       
ARPS (revised definition, GAAP) $ 12.89     $ 13.53   $ 13.69   $ 14.07   $ 14.51   $ 13.98     $ 14.25   $ 14.23   $ 14.16   $ 14.03     14.18     $ 15.41   $ 17.74     $ 14.26   $ 16.68  
                                       
Purchase accounting adjustment $ 7,311     $ 7,021   $ 7,046   $ 4,763   $ 3,270   $ 22,100     $ 1,395   $ 856   $ 1,773   $ 1,700   $ 5,724     $ 15,843   $ 1,869     $ 2,251     17,712  
Adjusted revenue $ 528,119 *   $ 152,771   $ 159,038   $ 164,930   $ 175,206   $ 651,945     $ 178,713   $ 183,287   $ 190,296   $ 194,743   $ 747,039     $ 252,956   $ 292,582     $ 362,000   $ 545,538  
                                       
Average subscribers for the period   3,363       3,591     3,701     3,794     3,951     3,753       4,147     4,272     4,438     4,587     4,358       5,128     5,463       4,205     5,274  
ARPS (previous definition, adjusted revenue) $ 13.09     $ 14.18   $ 14.33   $ 14.49   $ 14.78   $ 14.48     $ 14.37   $ 14.30   $ 14.29   $ 14.15   $ 14.29     $ 16.44   $ 17.85     $ 14.35   $ 17.24  
                                       
                         
Average subscribers for the period, excluding Constant Contact                 4,812     4,906       4,205     4,838  
GAAP revenue excluding Constant Contact               $ 198,048   $ 196,041     $ 359,749   $ 394,089  
ARPS (revised definition, GAAP) excluding Constant Contact               $ 13.72   $ 13.32     $ 14.35   $ 13.58  
                         
Adjusted revenue excluding Constant Contact               $ 200,233   $ 197,404     $ 362,000   $ 397,637  
ARPS (previous definition, adjusted revenue ) excluding Constant Contact               $ 13.87   $ 13.41     $ 14.35   $ 13.70