Rightside Group, Ltd.
02/28/2017

Rightside® Announces Fourth Quarter and Full Year 2016 Financial Results

Fourth Quarter Registry Revenue Grows 27% Over the Prior Year Period
Full Year Registry Revenue Grows 40% Over the Prior Year Period
Company Announces $50 Million Share Repurchase Program

KIRKLAND, Wash., Feb. 28, 2017 (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 fourth quarter and full year ended December 31, 2016.

"In the fourth quarter, we executed on our strategy to deliver revenue growth in our higher margin businesses - focusing on our new gTLD registry business and our retail registrar, Name.com, while optimizing for margin expansion," said Chief Executive Officer Taryn Naidu. "For the full year 2016, registry services revenue increased 40% year-over-year while Adjusted EBITDA increased 92% year-over-year.  The divestiture of eNom has strengthened our financial profile and, as announced today, enabled us to initiate a significant stock repurchase program. The Company narrowed its focus on our most strategic business, our new gTLD registry business and our retail registrar, Name.com. We believe this faster growing, stronger margin and more profitable business, better reflects the true nature of Rightside's mission, strategic focus, and investment thesis and is consistent with our commitment to delivering shareholder value."

  
Financial Summary         
(in thousands)         
          
  Three Months Ended  Year Ended 
  December 31, December 31, 
   2016   2015   2016   2015  
Registrar services $7,846  $6,957  $29,120  $24,852  
Registry services  3,202   2,526   11,785   8,438  
Aftermarket and other  4,233   7,284   22,620   25,377  
Eliminations (1)  (372)  (437)  (1,401)  (1,238) 
Total revenue $14,909  $ 16,330  $62,124  $57,429  
          
Loss (gain) on other assets, net $94  $(721) $(853) $(9,403) 
          
Loss from continuing operations before income tax  $(10,561) $(7,752) $(33,706) $(28,049) 
Income tax expense (benefit)  15,820   (2,260)  10,373   (8,178) 
Loss from continuing operations  (26,381)  (5,492)  (44,079)   (19,871) 
Income from discontinued operations, net of income tax  5,070   1,369   10,761   8,547  
Net loss $(21,311) $(4,123) $(33,318) $(11,324) 
          
Adjusted EBITDA (2) $2,817  $2,563  $9,212  $4,807  
          
Adjusted EBITDA from continuing operations (3) $(854) $(2,434) $(7,203) $(13,892) 
          

(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.

(3)  This Non-GAAP financial measure is described below and reconciled to GAAP loss from continuing operations in the accompanying table.

Full Year 2016 Financial Highlights
(Unless otherwise noted, all comparisons are relative to the fiscal full year 2015. All financials will be reported on a continuing operations basis to reflect the recent sale of eNom.)

Business Highlights

 

Key Operating Metrics 
                
  Three Months Ended    Year Ended    
  December 31,    December 31,    
  2016 2015 Change  2016 2015 Change  
Registry Services               
End of period domains (in thousands) (1)  565  401 40.9%  565  401 40.9% 
Average revenue per domain (2) $23.06 $26.85 -14.1% $24.40 $30.69 -20.5% 
Renewal rate (3)  59.4% 52.6%    56.3% 58.6%   
                
Registrar Services                
End of period domains (in millions) (1)  1.9  1.8  5.6%  1.9  1.8 5.6% 
Average revenue per domain (4) $16.83 $15.58 8.0% $15.84 $14.46 9.5% 
Renewal rate (3)  65.1% 69.0%    68.4%  70.5%   
                

(1) A domain is defined as an individual domain name registered by a third-party customer on Rightside's registry or registrar platforms for which Rightside has begun to recognize revenue.

(2) Average revenue per domain is calculated by dividing registry services revenue for a period by the average number of domains registered on Rightside's registry 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 registry or registrar platforms that are renewed after their original term expires.

(4) 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.

Liquidity and Capital Resources

Business Outlook

For the full year ending December 31, 2017, Rightside expects the following:

Conference Call and Webcast

Rightside will host a conference call and audio webcast with investors and analysts today, February 28, 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, depreciation and amortization, stock-based compensation, and certain gains, losses, and expenses that we do not believe are indicative of ongoing core business operating results. 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 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.

We define Adjusted EBITDA from continuing operations as loss from continuing operations adjusted for interest, income taxes, depreciation and amortization, stock-based compensation, and certain gains, losses, and expenses that we do not believe are indicative of ongoing core business operating results. Adjusted EBITDA from continuing operations is a non-GAAP financial measure and its most directly comparable GAAP financial measure is GAAP loss from continuing operations.  A reconciliation of GAAP loss from continuing operations to Adjusted EBITDA from continuing operations can be found in the accompanying table. Adjusted EBITDA from continuing operations 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 from continuing operations only as a supplement.

We have not provided a complete reconciliation of its Adjusted EBITDA guidance to the comparable forward-looking GAAP financial measure, net income (loss), because we are unable to provide a forward-looking estimate of certain reconciling items between net income (loss) and Adjusted EBITDA guidance including: acquisition and realignment costs; advisory and consulting fees; provision for income taxes; and gain (loss) on other assets, net.

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 one of the most admired registrar brands in the industry, Name.com. Headquartered in Kirkland, WA, Rightside has offices in North America and Europe. 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 registries; Rightside's ability to successfully market and sell its gTLDs; the difficulty in predicting and developing consumer demand for new gTLDs; Rightside's anticipated use of cash proceeds from the divestiture of eNom; expected benefits from the divestiture; expectations about plans and objectives for future operations after the eNom divestiture; and expected benefits from a share repurchase program. 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 September 30, 2016 filed with the Securities and Exchange Commission on November 9, 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 Year Ended 
  December 31, December 31, 
   2016   2015   2016   2015  
Revenue $14,909  $16,330  $62,124  $57,429  
Cost of revenue (excluding depreciation and amortization)   7,794   9,277   35,401   34,474  
Sales and marketing  1,782   2,466   8,066   8,519  
Technology and development  2,872   3,790   12,347   14,751  
General and administrative  4,862   4,776   19,643   19,204  
Depreciation and amortization  3,143   3,252   12,660   12,993  
Loss (gain) on other assets, net  94   (721)  (853)  (9,403) 
Interest expense  633    1,226   4,297   4,922  
Loss on debt extinguishment  4,257      4,257     
Other expense (income), net   33   16   12   18  
Loss from continuing operations before income tax  (10,561)  (7,752)  (33,706)  (28,049) 
Income tax expense (benefit)  15,820   (2,260)   10,373   (8,178) 
Loss from continuing operations  (26,381)  (5,492)  (44,079)  (19,871) 
Income from discontinued operations, net of income tax  5,070   1,369   10,761   8,547  
Net loss $(21,311) $(4,123) $(33,318) $(11,324) 
           
Basic (loss) income per share attributable to common
  stockholders:
          
Continuing operations $(1.35) $(0.29) $(2.28) $(1.05) 
Discontinued operations  0.26   0.07   0.56   0.45  
Basic (loss) income per share $(1.09) $(0.22) $(1.73) $(0.60) 
Diluted (loss) income per share attributable to common
  stockholders:
         
Continuing operations $(1.35) $(0.29) $(2.28) $(1.05) 
Discontinued operations  0.26   0.07   0.56    0.45  
Diluted (loss) income per share $(1.09) $(0.22) $(1.73) $(0.60) 
Weighted average number of shares outstanding:          
Basic  19,478   19,039   19,308   18,867  
Diluted  19,478    19,039   19,308   18,867  
          

 

Rightside Group, Ltd.
Balance Sheets
(in thousands)
(unaudited)
     
     
  December 31, December 31,
  2016 2015
     
Assets    
Current assets    
Cash and cash equivalents  $31,922 $45,095
Accounts receivable, net  3,337  4,575
Prepaid expenses and other current assets  2,751  2,897
Deferred registration costs   9,063  8,834
Assets held for sale  129,399  132,224
Total current assets  176,472  193,625
Deferred registration costs, less current portion   1,594  1,259
Property and equipment, net  5,400  7,567
Intangible assets, net  46,961  52,163
Goodwill  70,921  70,921
Deferred tax assets, net    2,904
gTLD deposits  2,169  8,139
Other assets  671  1,353
Total assets $304,188 $337,931
     
Liabilities and Stockholders' Equity     
Current liabilities    
Accounts payable $1,080 $1,400
Accrued expenses and other current liabilities  8,887  11,520
Debt  12,800  1,500
Capital lease obligation  983   1,193
Deferred revenue  19,475  17,681
Liabilities held for sale  133,256  135,130
Total current liabilities  176,481  168,424
Deferred revenue, less current portion  4,429  3,214
Debt, less current portion    21,701
Capital lease obligation, less current portion    811
Deferred tax liabilities, net  8,102  
Other liabilities  261  494
Total liabilities  189,273  194,644
Total stockholders' equity  114,915  143,287
Total liabilities and stockholders' equity $304,188 $337,931
     

 

Rightside Group, Ltd. 
Reconciliation of Net Loss to Adjusted EBITDA 
(in thousands) 
(unaudited) 
          
          
  Three Months Ended Year Ended 
  December 31, December 31, 
   2016   2015   2016   2015  
Net loss $(21,311) $(4,123) $(33,318) $(11,324) 
Add (deduct):         
Income tax expense (benefit)  12,311   303   11,477   (2,314) 
Loss (gain) on other assets, net (1)  94   (721)  (2,153)  (9,403) 
Loss on debt extinguishment  4,257      4,257     
Interest expense  633   1,227   4,297   4,922  
Depreciation and amortization  3,903   4,111   16,023   16,428  
Stock-based compensation expense  1,785   1,653   6,649    6,296  
Acquisition and realignment costs     113   564   202   
Transaction-related advisory and consulting fees  1,145      1,416     
Adjusted EBITDA $2,817  $2,563  $9,212  $4,807  
          

(1)  Net loss (gain) on withdrawals of interest in gTLD applications, included in gain on other assets, net.

Rightside Group, Ltd.
Reconciliation of Loss from Continuing Operations to Adjusted EBITDA from Continuing Operations
(in thousands)
(unaudited)
         
         
  Three Months Ended Year Ended
  December 31,  December 31,
   2016   2015   2016   2015 
Loss from continuing operations $(26,381) $(5,492) $(44,079) $(19,871)
Add (deduct):        
Income tax expense (benefit)   15,820   (2,260)  10,373   (8,178)
Loss (gain) on other assets, net (1)  94   (721)  (853)  (9,403)
Loss on debt extinguishment  4,257      4,257    
Interest expense  633   1,227   4,297   4,922 
Depreciation and amortization  3,143   3,252   12,660   12,993 
Stock-based compensation expense  1,580   1,461   5,828   5,526 
Acquisition and realignment costs     99   314   119 
Adjusted EBITDA from continuing operations $(854) $(2,434) $(7,203) $(13,892)
         

(1)  Net loss (gain) on withdrawals of interest in gTLD applications, included in gain on other assets, net.

Investor Contacts

The Blueshirt Group

Allise Furlani, 212-331-8433

Brinlea Johnson, 212-331-8424

IR@rightside.rocks

Primary Logo

Source: Rightside Group, Ltd.

News Provided by Acquire Media