Q2 2020 Endurance International Group Holdings Inc Earnings Call
At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session.
To ask a question. During this session you would need to press star one you telephone I would now like to have the conference over to Angela White VP of IR. Thank you. Please go ahead ma'am.
Thank you Tanya good morning, everyone. It's my pleasure to walking into our second quarter 2020 earnings call.
First we'll go through some prepared remarks, after which we'll turn to see what are you prepared a presentation to accompany our common which is available in the Investor Relations section of our website at <unk> Dot com.
I'm not necessary to follow along we recommend referencing that presentation slides the presentation slides alongside her prepared remarks as is customary let me now read the safe Harbor statement.
Statements made on today's call will include forward looking statements about a dearth of future expectations plans and prospects all such forward looking statements are subject to risks and uncertainties. Please refer to the cautionary language in today's earnings release.
<unk> form 10-K filed with the ITC on February four 220, 20, and form 10-Q filed with filed on May 620, 20 for discussion of risks and uncertainties that could cause our actual results may materially different from those contemplated and these forward looking statements and drink you gotta seen any obligation to update our forward looking statements.
During the call will roughly double non-GAAP financial measures, including adjusted EBITDA free cash flow that big adjusted EBITDA.
A reconciliation of these non-GAAP financial measures. The most directly comparable GAAP measure is available on the presentation located any IR section of our website.
With that I'll turn the call over to Jon Faulkner, our president and CEO.
Thank you Angela good morning.
Despite the disruption in uncertainty brought about by the Cobot 19 pandemic I'm encouraged by the resilience and ingenuity, we're seeing for more from the from individuals and businesses as they navigate this complex environment. Obviously the environment remains highly complex as we in the summer and entered the traditional.
School year and full cycle.
On a macro level, we remain focused on investing in solutions that are critical for the success of all businesses, including our SMB target market.
Turning to results.
Second quarter revenue was 274 million in adjusted EBITDA was 84 million.
We continue to trend of positive net subscriber additions with over 97000 net adds in the core excluding the impact of single platform.
Sales in December.
19.
GAAP revenue grew 1% year over year and cash bookings grew 5% year over year.
[noise] I'm extremely proud of the way our team members continue to collaborate and deliver solutions that are critical to a good success of our customers for the last several months. Our team has executed against the backdrop of Cobra 19 related disruptions to their work environment as well as to their personal wash.
Turning to slide six.
We operate to scale business segments digital marketing and web presence as a needs.
For web presence digital marketing E Commerce and other services converge in this growing markets customers are increasingly looking for solutions that are easy to use priced reasonably and drive to value necessary to help them succeed.
Over the last two years, we have increased and bill Smith to address these opportunities on the market scaling our business and delivering value to an increasing number of customers.
With focused investment in our strategic brands, we're expanding our total addressable markets as we moved beyond our original primary solutions.
Such as domain name Registrar website hosting an email marketing.
In addition to our product and engineering investments, we're also adding valuable capabilities through bolt on acquisitions, such as retention science and E Com dash.
Our strategic investment efforts are delivering results, while we remain disciplined with her operating and capital spend.
We have made great progress scaling in integrating our teams in Asia Pac Latin America, and Holland as we all work to support of course, some strategic brands and drive growth.
Turning now to slide seven and starting with our digital marketing segment.
We are transforming constant contact permit email marketing point solution provider to a digital marketing platform.
We're pleased with the operational progress we made in the first half a year and our results reflect excellent progress towards our goal to accelerate growth.
Turning now to slide eight.
Constant contact is a well known director small business brand with a long history of delivering high touch support combined with customer return on investment.
Our SAS email marketing business is highly profitable and we are investing to enhance our coal platform, while expanding our solutions to address an increasing number of customer use cases.
Our constant contact brand is a valuable assets in the core of our digital marketing segment. We recently launched a redesign of the brand with messaging that we believe a search our position as a digital marketing services provider not only get email marketing, but also in strategic a Jason.
For example, our message incorporates our expansion into ecommerce websites and social marketing.
The rebrand was completed my constant contracts in House agency team, which brought a fresh and bought or feel to the brand listening to customers and employees. The result isn't identity that honors, where we've been well portraying our vision for what comes next.
As we look for opportunities to serve customers with advanced marketing needs. We are leveraging our existing solution sets and integrating your card solutions.
Last fall, we added become dash and ecommerce platform that enables inventory management distribution and multichannel Mark was listings for ecommerce retailers and this morning, we announced the acquisition of retention science, which is highlighted on slide nine.
Turning to slide nine we're excited to add to very entrepreneurial retention science team that is skilled their business to annualized revenue of approximately $8 million the company's trps Midmarket and enterprise customers that are focused on direct to consumer E commerce selling.
The addition of this team and technology platform will allow us to accelerate our efforts to support and retain our existing ecommerce customers well, capturing a larger share of the growing E Commerce solutions market.
We welcome to the new team to encourage.
Turning now to our web presence segment on slide 10.
We're pleased with your over your quote to cash bookings GAAP revenue and net subscribers. We're also pleased with the team's execution across the globe delivering very strong adjusted EBITDA of approximately 40 42 million, which does include some benefit from lower health care travel and facilities expenses.
Turning now to slide 11.
Our results year to date confirmed that our investment in strategic brands. This work.
Our U.S. teams combined with our Asia Pac Latin in Holland teams are delivering positive results in support of our web presence growth strategy.
Our focus for the remainder of the year, Arizona brand level solution, Roadmaps, which deliver continuous user experience improvement and customer successfully product packaging and solution integration.
Turning to slide 12.
Across our to scale businesses, we are positioned to participate in the secular growth couldn't the market for SMB digital services.
Our plan for the second half of the year reflects continued investment to drive growth and we won't make focused on strengthening our company. While we navigate this complex economic in health care environment.
With that I'll turn the call over to Mark Montenay to discuss our financial results in more detail.
Thank you Jeff on slide 14.
I am piece to it you a second quarter 2020 resort well know reported basis.
Revenue was $274 million.
Adjusted EBITDA was 84.
He goes through the phone is coming through from operation This capital expenditures.
Finance equipment was $55.9 billion.
Please note that in the same killer do you go revenue adjusted EBITDA contribution from single platform.
6.8, and $1.1 million respectively.
The Seattle single dry food coup in December 2019.
Normalizing for these numbers Robin you see people do you agree with me to $71.4 million and not just to be done some $5.3 million.
Oh, you over you increasing adjusted EBITDA was due to higher revenue.
Non recurring reductions in <unk> cost.
<unk> consulting cone 0.2 calls Lord troubled Finfets, you will need it's been.
It was offset by increased Lebanon, that's been in marketing and engineering.
No Im pleased to just get calls with due mostly to delete doctors' visits and elective procedures during the second quarter.
In addition dramatically we do so business well during the second quarter 2020, and almost all while I'm pleased to have been working remotely since mid March.
We expect that eventually on his skill costs, we returned to normal more level.
But that a portion of the cool via the we need either reduction in trouble and facilities. We need calls we've seen we'd be sustainable over the long term as we engineered business.
Give us some flexi between diversity savings in other areas would approve them the bottom line.
GAAP cash from operations second quarter was $67.8 million.
Picks was 11.8 and free cash was 55.9.
Well, we increased cash from operation in free cash.
Most impacted by hi crush spinning.
<unk> expenses low into its weight.
Well for tax payment.
Slide 15, we finished the second quarter of 2021.
0.87 7 million subscribers.
It is club addition for the first quarter were approximately 97 points we solved.
In addition, we driven mostly by strong gross adds you know what prison segment.
In the second quarter of 2020, <unk> combined average revenue per Cisco I do ops was $18 in 90%.
What president he was 13 49 and 69 doors in digital marketing.
Slide 16, whose revenues by $46.2 million, adjusted EBITDA, 156.5, and free cash to $79.7 million.
In the same period, a year ago revenue and adjusted EBITDA contribution from single platform was $13.9 million in 2.6 billion respectively.
Normalizing for these numbers revenue does seem to really do you go would have been slide $45 million.
Adjusted EBITDA over $152.2 billion.
Slide 17, we ended the second quarter with.
1.696 billion going towards senior debt.
Including all the deferred purchase obligation in capital raises a $5 million.
I would caution about and she $251 million.
And that that the didn't want to appeal. It was 1.55 billion dollar.
Oh, It can bank adjusted EBITDA for the period ending June to use was 326.1.
Oh senior debt leverage we should it was 3.77 tunes and we means whether it be to a maximum no we should have 60.
On 18, we ended the quarter is 151 million to off cash from the Burns.
We continue to Munnsville balance sheet prudently. This you.
First of all of the European whose we feel comfortable with our liquidity position.
During the second quarter.
Which is $9.3 million, how you'd bones, I didn't know, but just kind of 3%.
<unk> foods corporate TBD total you to the bone, we purchase was $12.2 million.
Turning to walk through enrollment during the quarter, we p. 7.9 million door and scheduled amortization.
You today will be done $15.8 million about terminal.
You today, we've repurchased approximately 8.7 million she is $14.4 million at an average price per show up with the oldest 66.
Vertical this purchase occurred in the first quarter.
Finally, we signed a contract to acquire with pension funds for toward purchase price was $35 million.
17.5 million, though to be paid upon the close.
Remaining 17.5 million dollar we paid an earn out in the food concentration over the next we use.
We expect the transaction do crews by mid August 2020.
Slide 19.
When we present your result, a few years.
You weeks ago, we introduced garners foot 2020 <unk>.
<unk> updated guidance incorporates the benefit we'll see you know business as a result investment <unk> delivering value to our customers and cooling business conditions.
This guidance also incorporates the revenue contribution for the remainder will do you in a small dilutive in part to just to be or did we expect from the retention science acquisition.
And for joining us today.
No we turned the corner, but Jeff.
Thank you mentioned.
Well.
Hello, Thanks, Mark we're very pleased with our first half performance since I joined the business in late 2017, we've been executing a very disciplined integration program to operate at scale more building out our critical teams in engineering marketing customer service in operations, we're focused on delivering increased value to our customers.
And believe our first half results control most strategy to focus our investment on selected strategic brands as we build our scale SMB digital marketing platform. Thank you for joining US. This morning, and we look for Troy next update now I'll turn the call back to the operator to begin QNX.
Thank you.
Minder to ask a question.
Please press Star then the number one on your telephone to withdraw your question, what's the pound or Heskey.
Please standby for your first question.
Sure.
Your first question is from the the Khan with Suntrust.
Yeah, Hi, Ben Locke Oh.
So that's a few questions and maybe a clarification so.
Just one the reintroduction of guidance can you just give us a sense of Oh, what a wouldn't give you confidence to reintroduce it since it was it still been drawn I'll.
Let's start with Chrysler is how do you just seeing better trends and maybe can you give us some more color on all this in turn trends you might be seen there.
No that is often so much speculation about maybe SMB closures or the government Ed Graham child.
Like I call how are you thinking about that.
And then I have Oh, two calling section. Thank you.
So so mark do you want to handle Bose.
Yes, no, but I think given the.
Bussman, we've made in all product Oh solution and a good conversion where you've seen.
So thing Uh huh.
Rubber use I don't know if it's a crew was six report a harder demand for products.
Given the <unk>.
80 trends in the month twin we've seen second quarter and what we've seen so far.
Yes.
I think we're comfortable Oh, we introduced guidance that have been doing one robin you and 300 million.
And then we're going to benefit from lower taxes due to the kiosks that allows us to a swing so free cash flow guidance for says what we should this.
I think the business is performing very well the teams.
Okay and.
Delivering.
And I'll, just adding a little color or.
As I tried to allude to in the prepared remarks.
We're executing roadmaps that we put into motion that definitely give us a belief that that finishing our road maps it continuing to make the improvements on the key brands and then the geographies, where we're we're investing to grow.
We feel like we feel like we're we're.
In a position to true to drive through some challenges with cobot.
And because people need these solutions.
So that's that's our objective and that's why we probably introduce skytouch.
Understood and then it seems like based on what what Mark call.
Oh said that the monthly trends continued commission to be strong it's not.
And you're seeing.
And demand is that the care.
Yeah, I don't pick were commenting on.
On anything beyond what we've produced so far.
Got it Okay and then another question I had one just on this under constant contact in the opportunity there.
Oh and transforming it beyond acquired solution to address the border up opportunity in digital getting shed any stats Oh, Oh on the success he might have seen so far or any any any data points that would really helpful.
Also are you seeing a bigger opportunity and upselling to listen subs are is that also on upsides of lots entered in bringing a new subscriber into the coal or should we think about it.
Yeah, I I would say.
The retention science.
Mission to walk capabilities.
This is a good indicator that our first focused at constant contact is he is making.
Making sure the to customers that have already bought from us.
Get increasing success.
And and in conjunction with that we do feel like we have the ability to attract customers that we have not previously been bringing in the door and helping succeed. So we have a combination of improvements to early life cycle and lifetime success and front door.
Velocity that is our strategy.
Constant contact.
And of course as you intimated earlier, we do worry that there will be cobrand Sean.
In the marketplace, but we feel like we are investing to grow through those challenges.
Because the brand constant contract and the support levels and the quality of our platform for the price people pay.
We really feel like step the long term environment, where digital services or our secular ligand.
Understood.
And.
Maybe the last question for me if I may so.
On lead on the debt side, Oh, I understand there's a.
Prepayment penalty Oh, but what are the opportunities that you you can go to available to maybe potentially refinanced at and I don't know rate and given the environment.
Yeah I know.
Yeah.
The <unk> the the high yield debt is callable I'm at a kind of premium.
But kept that we bought this quarter, we bought below par.
We've been opportunistic on that front.
Obviously, and and I I think that the.
As we continue to invest to grow our business I think our balance sheet structure is is continuously something to be reviewed.
Yes.
Thank you.
Your next question is from Brent fail field with Jefferies.
Hi, This is John again for Brent Thill set a couple of questions regarding be either we tend to try to acquisition.
Could you talk a bit more about you know the their business model revenue model I mean.
What are the products and how did they generate revenues from dose.
Yes, so so.
[music].
Retention science it has a highly.
Capable.
A customer analytics core platform.
And they're probably service offering today is E mail marketing for E commerce related retailers.
And they're ecommerce all know some large global plans.
So either it is fundamentally a profit on revenue stream driven by E commerce email marketing.
And it's very complimentary to some customers that we've not traditionally.
Competed for that constant contact.
And it's it's a good it's not it's not play about pricing structure and the size of the relationships are different than constant contact more larger.
Contract databases, and typically larger customers.
But we feel like the technology and the team bring a lot to our overall strategy at constant contact Chris we bring to the capabilities together.
Okay. That's helpful and then in terms of again.
Just had called it is a higher arps business because it is more advanced marketing demands and larger customers typically.
So on that last point.
You know in terms of new customer segments and.
How can we think about I guess the mix currently that you had the team is small business, which is mission large enterprise does that kind of taking into.
Maybe a kind of a newer segment.
Well, we we feel like see.
No it's the.
Retention science will bring us the ability to to extend the range of customers, we can start or under the constant contact brand.
But our goal is to take all the capabilities and delivered them into.
The segment.
We have traditionally been qualified to compete with constant contact.
Thanks, small and medium doesn't us and obviously I'm not for profit so where we will invest to continue to grow retention science, we're very pleased with.
The way they're growing today.
But what are the the real value, we're the largest value.
To this acquisition will be the ability for <unk>.
The expertise and capabilities, Oh that platform and team to be delivered two to some customers that right now or less demanding by nature than the ones they target specifically.
Okay. So that helped in the.
Well put as they grow one more question and he and you can share in terms of what you're seeing in comes as a small business closures at our permanent.
Any color you shouldn't be helpful. Thank you.
I wish it were seeing the same thing everybody else is saying, which is at least thus far there's been pretty good resilience.
Obviously certain sectors like like restaurants and local retail.
There there been more frontline closures, but you know we're not a heavily restaurant focused business and so are we.
We've seen I would say ingenuity resilience and demand have done, but the first wave, which is why we're investing in finishing off the road maps. So that we can participate in the new demand and and our goal is to try to help our customers through with us. They people are all.
Our customers, if they're going to compete survive by saying all we feel very strongly that that the capabilities, we're investing in our necessary Bush's optional in the in the go forward World.
Okay. That's very helpful. Thanks very much.
Yep. Thank you.
At this time there no further questions.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Thank you.
You're welcome.