Rightside Group, Ltd.
08/09/2016

Rightside Announces Second Quarter 2016 Financial Results

Registry Revenue Grows 52% Over the Prior Year Period

KIRKLAND, Wash., Aug. 09, 2016 (GLOBE NEWSWIRE) -- Rightside Group, Ltd. (Nasdaq:NAME), a leading provider of domain name services that advance the way businesses and consumers define and present themselves online, today announced financial results for the second quarter ended June 30, 2016.

"We delivered strong second quarter results as Rightside continues to focus on growing awareness and demand for new gTLDs through our retail registrar and expanding network of distribution partners.  We are focused on accelerating growth in our high margin businesses while reducing costs across the board," said Chief Executive Officer Taryn Naidu.  "Our registry services business continues to be core to the Company's strategy and its revenue grew 52% to $2.9 million.  Name.com's revenue grew 20% year-over-year, to an all-time high on both a GAAP revenue and unit registration basis,  due to a higher mix of new gTLDs with an average selling price approximately three times that of legacy gTLDs.  This quarter, we also reported Adjusted EBITDA of $2.3 million, nearly three times higher than the prior year period as we've continued to grow our mix of higher margin registry services revenue and drive cost synergies throughout the business."

          
Financial Summary
(in thousands)​
           
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
   2016   2015   2016   2015  
Registrar services $44,157  $43,281  $88,175  $85,280  
Registry services  2,932   1,925   5,571   3,530  
Aftermarket and other  7,839   7,544   17,108   14,876  
Eliminations (1)  (891)  (579)  (1,693)  (984) 
Total revenue $54,037  $52,171  $109,161  $102,702  
          
(Gain) loss on other assets, net $ (2,219) $262  $(2,218) $(6,961) 
          
Loss before income tax $(2,546) $(6,401) $(8,021) $(5,468) 
Income tax benefit  (75)  (728)  (443)  (1,671) 
Net loss  $(2,471) $(5,673) $(7,578) $(3,797 ) 
          
Adjusted EBITDA (2) $2,314  $779  $4,123  $1,347  


 (1)Amounts in the eliminations line reflect the elimination of intercompany charges between our Registrar and Registry services businesses.
  
 (2)This Non-GAAP financial measure is described below and reconciled to GAAP net loss in the accompanying table.
    

Second Quarter 2016 Financial Highlights
(Unless otherwise noted, all comparisons are relative to the fiscal second quarter 2015.)

Business Highlights

 
Registrar Services Operating Metrics
                 
   Three Months Ended     Six Months Ended    
  June 30,     June 30,    
   2016   2015   Change   2016   2015   Change 
End of period domains (in millions) (1)  16.3   16.3   0.0%  16.3   16.3   0.0%
Average revenue per domain (2) $10.82  $10.66   1.5% $10.84   $10.58   2.5%
Renewal rate (3)  73.3  74.1%      75.3  75.8    


 (1)A domain is defined as an individual domain name registered by a third-party customer on Rightside's registrar platforms for which Rightside has begun to recognize revenue. 
  
 (2)Average revenue per domain is calculated by dividing registrar services revenue for a period by the average number of domains registered on Rightside's registrar platforms in that period.  Average revenue per domain for partial year periods is annualized.
  
 (3)The renewal rate is defined as the percentage of domain names on Rightside's registrar platforms that are renewed after their original term expires.
    

Liquidity and Capital Resources

Business Outlook

For the full year ending December 31, 2016, Rightside reaffirms its revenue and Adjusted EBITDA guidance:

Conference Call and Webcast

Rightside will host a conference call and audio webcast with investors and analysts today, August 9, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time):

About Non-GAAP Financial Measures

We define Adjusted EBITDA as net income (loss) adjusted for interest, income taxes, gain on sale of marketable securities, gain (loss) on other assets, net, depreciation and amortization, stock-based compensation, as well as the financial impact of acquisition and realignment costs. Acquisition and realignment costs include legal, accounting and other professional fees directly attributable to acquisition activity as well as employee severance and other payments in connection with corporate realignment activities. Adjusted EBITDA is a non-GAAP financial measure and its most directly comparable GAAP financial measure is GAAP net income (loss).  A reconciliation of GAAP net income (loss) to Adjusted EBITDA and Adjusted EBITDA guidance can be found in the accompanying table. Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.  Rightside compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only as a supplement.

About Rightside

Rightside® inspires and delivers new possibilities for consumers and businesses to define and present themselves online. The company, with its affiliates, is a leading provider of domain name services, offering one of the industry's most comprehensive platforms for the discovery, registration, usage, and monetization of domain names. In addition to being a new gTLD registry operator, Rightside is home to some of the most admired brands in the industry, including eNom and Name.com. Headquartered in Kirkland, WA, Rightside has offices in North America, Europe, and Australia. For more information please visit www.rightside.co.

Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, including, among others, Rightside's expected total revenue, Adjusted EBITDA, and registry services revenue.  Statements containing words such as may, believe, anticipate, expect, intend, plan, project, and estimate or similar expressions constitute forward-looking statements. Statements regarding Rightside's future performance are based on current expectations, estimates and projections about our industry, financial condition, operating performance and results of operations, including certain assumptions related thereto. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Forward-looking statements involve risks and uncertainties including, among others:  Rightside's ability to successfully operate new gTLD registries and provide back-end infrastructure services to new and existing registries; Rightside's ability to successfully market and sell its gTLDs; and the difficulty in predicting and developing consumer demand for new gTLDs. More information about potential risk factors that could affect Rightside's operating and financial results are contained in Rightside's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed with the Securities and Exchange Commission on May 10, 2016.  All forward-looking statements are expressly qualified in their entirety by this cautionary statement.  Rightside does not intend to revise or update the information set forth in this press release, except as required by law, and may not provide this type of information in the future.

 
Rightside Group, Ltd.
Statements of Operations
(in thousands, except per share data)
(unaudited)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
   2016   2015   2016   2015 
Revenue $54,037  $52,171  $109,161  $102,702 
Cost of revenue (excluding depreciation and amortization)  40,695   40,330   82,615   79,287 
Sales and marketing  2,706   2,533   5,344   5,027 
Technology and development  4,741   5,267   10,625   10,382 
General and administrative  5,280   4,904   10,204   9,887 
Depreciation and amortization  4,203   4,094   8,249   8,080 
(Gain) loss on other assets, net  (2,219)  262   (2,218)   (6,961)
Interest expense  1,218   1,226   2,453   2,470 
Other income, net  (41)  (44)  (90)  (2)
Loss before income tax  (2,546)  (6,401)  (8,021)  (5,468)
Income tax benefit  (75)  (728)  (443)  (1,671)
Net loss $(2,471) $(5,673) $(7,578) $(3,797)
         
Net loss per share attributable to common stockholders:         
Basic $(0.13) $(0.30)  $(0.39) $(0.20)
Diluted  (0.13)  (0.30)  (0.39)  (0.20)
         
Weighted average number of shares outstanding:        
Basic  19,247   18,805   19,197   18,755 
Diluted  19,247   18,805   19,197   18,755 
         

 

Rightside Group, Ltd.
Balance Sheets
(in thousands)
(unaudited)
     
     
  June 30, December 31,
   2016   2015 
     
Assets    
Current assets    
Cash and cash equivalents $47,809  $45,095 
Accounts receivable, net  12,669   11,306 
Prepaid expenses and other current assets  5,214   7,233 
Deferred registration costs  77,915   75,435 
Total current assets  143,607   139,069 
Deferred registration costs, less current portion  16,298   15,700 
Property and equipment, net  11,818   13,298 
Intangible assets, net  52,371   54,328 
Goodwill  103,042   103,042 
gTLD deposits  2,540    8,139 
Other assets  1,072   1,451 
Total assets $330,748  $335,027 
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable $8,300  $7,262 
Accrued expenses and other current liabilities  20,262   24,591 
Debt  1,500   1,500 
Capital lease obligation  1,101   1,193 
Deferred revenue  102,326    97,593 
Total current liabilities  133,489    132,139 
Deferred revenue, less current portion  21,158   20,487 
Debt, less current portion  21,751   21,701 
Capital lease obligation, less current portion  399   811 
Deferred tax liabilities, net  15,003   15,477 
Other liabilities  842   1,125 
Total liabilities  192,642   191,740 
Total stockholders' equity  138,106   143,287 
Total liabilities and stockholders' equity $330,748  $335,027 
     


Rightside Group, Ltd. 
Reconciliation of Net Loss to Adjusted EBITDA 
(in thousands) 
(unaudited) 
           
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
   2016   2015   2016   2015  
Net loss $(2,471) $(5,673) $(7,578) $(3,797) 
Add (deduct):         
Income tax benefit  (75)  (728)  (443)  (1,671) 
(Gain) loss on other assets, net (1)  (2,219)  262   (2,218)   (6,961) 
Interest expense  1,218   1,226   2,453   2,470  
Depreciation and amortization  4,203   4,094   8,249   8,080  
Stock-based compensation expense  1,658   1,598   3,096    3,137  
Acquisition and realignment costs (2)     564   89  
Adjusted EBITDA $2,314  $779  $4,123  $1,347   


 (1)Net loss (gain) on withdrawals of interest in gTLD applications, included in (gain) loss on other assets, net.
  
 (2)Acquisition and realignment costs include employee severance and other payments attributable to acquisition or corporate realignment activities. Management does not consider these costs to be indicative of the Company's core operating results.


 
Rightside Group, Ltd.
Adjusted EBITDA Guidance Reconciliation
(in thousands)
(unaudited)
      
      
      
  Full Year Ending December 31, 2016 
  Low High 
Net loss (estimate) $(17,096) $(14,396) 
Add (deduct) - estimates:     
Income tax benefit  (850)  (1,150) 
(Gain) loss on other assets, net (1)  (2,218)  (2,218) 
Interest expense  4,900   5,100  
Depreciation and amortization  16,500   16,700  
Stock-based compensation expense  6,200   6,400  
Acquisition and realignment costs (2)  564   564  
Adjusted EBITDA guidance $8,000  $11,000  


 (1)Net loss (gain) on withdrawals of interest in gTLD applications, included in (gain) loss on other assets, net.
  
 (2)Acquisition and realignment costs include employee severance and other payments attributable to acquisition or corporate realignment activities. Management does not consider these costs to be indicative of the Company's core operating results.
  
Investor Contacts



The Blueshirt Group



Allise Furlani, 212-331-8433



Brinlea Johnson, 212-331-8424



IR@rightside.rocks

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